Arbitrations in Employment Law Cases

Arbitration agreements are a speedily growing trend in managing employment law disputes. Arbitration is an alternative dispute resolution method between a worker and an employer. Arbitration usually takes place in front of a retired judge or an experienced attorney who acts as a judge during the arbitration. Employers prefer arbitrations to civil litigation for many reasons. First and foremost, arbitrations proceed only in front of an arbitrator, there are no jurors. They usually progress much more quickly as courts usually are backlogged. The discovery process is much more flexible and faster. Finally, arbitrators do not award as much damages as the jurors usually do. While arbitrators must be neutral, the reality of the matter is that they often times side with employers simply because employers keep bringing more business to them: the cost of the arbitrations is fully paid by employers. As such, I believe neutrality may be tainted in that regard.

As of January 1, 2020, per AB 51, California employers, can no longer make mandatory arbitration agreements a condition of employment. California law now permits employees and job applicants to decline to sign their employer’s arbitration agreement. If they so decline, the employer may not retaliate in any manner or deny a potential job applicant an employment. However, the new law does not apply to existing agreements or the agreements workers entered voluntarily.

During the initial hiring process, an employee is often provided with a packet of documents to sign. These hiring packets usually contain an arbitration agreement. Employers do not explain to the employee what arbitration is and, most importantly, that by signing one, a worker is waiving their right to a jury trial in case of an employment law related dispute. However, all is not lost here because there are instances when an employee can still challenge an arbitration agreement even after signing one. If there is sufficient evidence to show that either the signed arbitration agreement was not drafted properly or there was some unfairness in the way it was presented to a worker, there are some options available to an employee. For example, the employee can challenge the arbitration agreement if there was no "meeting of the minds." Because the arbitration agreement is a contract, it requires all elements of the contract, and "meeting of the minds" is one of them. In order to prove the absence of the "meeting of the minds," a party must show that there was both "substantive and procedural unconscionability." Substantive unconscionability occurs when there is a term in the arbitration agreement that is either unlawful, one-sided in favor of the employer or overwhelmingly sets an unreasonable standard of conditions for the employees.

Procedural unconscionability occurs when there was something inherently unfair about the process or the way the arbitration agreement was executed. For example, there can be an inequality of power between both parties, as the stronger party (usually employer) uses the weaker party’s lack of information in order to skew their decision making. Sometimes unfair surprise can exist when some of the jargon is complex thereby making it hard to understand what the contract really entails. Another example of unfair process is when the arbitration agreement is written in a very small size making it difficult to read and easy to miss the critical language. In some occasions, oppression can result when the stronger party either threatens the weaker party into signing or pressures the weaker party enough until they have no option but to sign. These examples are known as procedural unconscionable.

For an arbitration agreement to be unenforceable, both "substantive and procedural unconscionability" must be present. However, when there is high level of procedural unconscionability demonstrated, only minimal level of substantive unconscionability may be required to prove the agreement invalid. And vice versa, if a party can show high degree of substantive unconscionability, only minimal level of procedural unconscionability may be required.

If you believe that you may have signed an arbitration agreement or your employer forces one on you and you need assistance in reviewing it, you should consult the employment attorneys at the Serendib Law Firm. We represent people in Orange, Los Angeles, San Bernardino, and Riverside Counties. Call us at 1-800-LAW-8825 (800-529-8825) or complete our online form.