Labor: Seeking fairness in employment arbitrations

The Supreme Court has repeatedly upheld mandatory arbitration agreements in recent years

In recent years a five-justice majority of the Supreme Court has repeatedly ruled in favor of arbitration. In 2010, the court handed down its decision in Rent-A-Center, West, Inc., v. Jackson, holding that courts should treat arbitration agreements in the employment context the same as arbitration agreements in commercial contracts. But contrary to the usual business-related dispute where the rights are determined by contract, an employment claim frequently does not arise out of the employment agreement and instead involves rights created by statute.

The plaintiff, Antonio Jackson, sued for alleged racial discrimination and retaliation. Jackson’s employer compelled arbitration, using the arbitration clause in Jackson’s employment agreement. This agreement provided for arbitration of all disputes arising out of Jackson’s employment with Rent-A-Center, including claims for discrimination.

Jackson had argued that the arbitration agreement was unconscionable. The Supreme Court ultimately ruled that such a claim would have to be decided by the arbitrator. This decision has reinforced the prevalence of arbitration clauses in employment agreements.

Despite the court’s willingness to treat employment agreements the same as commercial contracts, they are undeniably different. Business deals are negotiated between merchants with equal bargaining powers. In this era of high unemployment, most job applicants are just happy to be hired and are unlikely to quibble over an arbitration clause in their employment agreement. But by agreeing to arbitrate all disputes, as Jackson did, the potential employee is submitting to arbitration for not only contract disputes, but also potential statutory claims.

Many employers are now including arbitration clauses as a way of avoiding the difficulties inherent in the time-consuming and expensive litigation process. Arbitrators may have developed expertise in the field, offering greater predictability. Arbitrations offer a level of confidentiality denied in court proceedings. They are more informal, leading to quicker results with less discovery and expense, and fewer evidentiary roadblocks. Arbitrators are more flexible in scheduling hearings. The awards rendered in arbitration have greater finality as the grounds for appeal are more circumscribed.

These advantages have contributed to arbitrations becoming the preferred tribunal to resolve employment disputes. But this increased popularity has also elicited a reaction, including calls to ban pre-dispute binding arbitration clauses. A critical appraisal of the inner workings of both the judicial and the arbitration systems quickly reveals that neither side is perfect. There is room for improvement in both systems, but of the two, it is easier to reform private enterprise than a cumbersome bureaucracy.

Instead of viewing the growth of mandatory arbitration clauses as a threat to the protections provided by public law, we should be working to provide greater fairness within the arbitration process.

Contributing Author

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Juan Ramirez

Hon. Juan Ramirez, Jr. (Ret.) joined JAMS after 24 years serving on both the trial and appellate courts of the state of Florida, including two...

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