Arbitration Agreements

Many employees are forced to sign arbitration agreements as part of their employment.  In other cases, employers place arbitration agreements in employee handbooks. 

What is Arbitration?

 
Arbitration is a form of alternative dispute resolution. It is a way for private parties to sort out disagreements according to agreed-upon rules with little, if any, involvement by the courts.  Instead, the parties present their arguments to one or more private arbitrators of their choice, who will reach a binding decision and may order an arbitral award or other remedy.  The arbitration process is mainly governed by an arbitration contract or provision(s) to which the parties agreed, as well as federal or state law.  
 
Arbitration Agreements

 
You may consent to arbitration through a separate contract, or through a clause or provision that is part of another contract.  Typically, you consent by actually signing a contract.  However, the Texas Supreme Court has ruled that an employer can simply notify at-will employees of the details of an arbitration program it is adopting, and the employees can be bound to that arbitration program by continuing their employment, even if they never sign anything.   
 
Arbitration: Good or Bad?

 
Arbitration has positives and negatives.  It can be a cheaper and faster way to resolve disputes than suing in court.  The arbitration process is usually informal, and discovery (the ability to get information from the other side) is more limited. Your employer may agree to bear the costs of arbitration, as well.
 
However, depending on what is in the arbitration agreement, you might have agreed to a process that is confusing or even stacked against you.  Arbitrators are often industry insiders.  As a result, while they may be knowledgeable, they may also have worked with your employer repeatedly in the past and may be biased in their favor.  Furthermore, the rules of the arbitration could be designed to favor your employer.  Most importantly, by agreeing to arbitrate your dispute you are giving up most of your access to the court system and the rights that come along with that, such as your right to a trial by jury.  
 
Arbitration vs. Forced Arbitration

 
Arbitration between parties of comparable bargaining power is a common way to resolve commercial disputes, and can be mutually beneficial.  “Forced arbitration” happens when one side has no meaningful choice whether to arbitrate.  The arbitration process itself may also be biased.  In the employment context, “forced arbitration” is when you are required to agree to arbitration as a condition of employment or to receive benefits related to your employment.  While technically you cannot be coerced into accepting arbitration, in practice employers can make it very difficult to avoid arbitration if you want to start or continue working for them.
 
Access to the Courts 
 
By consenting to an arbitration agreement, you give up your right to sue your employer in court over some or all disputes you have—or may have—with them.  However, a party might still go to the courts to ask them to compel (order) arbitration if one party is trying to avoid it, confirm and enforce an arbitral award like a court order, or rarely to vacate (cancel) an award.
 
In addition, the U.S. Supreme Court has held that if you file a charge of discrimination against your employer with the Equal Employment Opportunity Commission (“EEOC”), the EEOC is not bound to arbitrate even if you would be. That is, it could still sue your employer in court and seek compensation for you as the victim.
       
Representation During Arbitration 
 
You may decide to represent yourself during arbitration. However, your employer may retain an attorney for arbitration--especially if the amount at stake is large.  Representing yourself in that case may put you at a serious disadvantage, as the other side may be much more familiar with the process.