Mandatory Arbitration Clauses Create Major Headaches for Employees and Consumers

July 15, 2013

Major companies are increasingly slipping mandatory arbitration clauses into employment contracts and consumer contracts, to the detriment of employees and consumers. A mandatory arbitration clause dictates that arbitration – rather than a traditional lawsuit – is the only remedy available should something go awry. These clauses have become increasingly popular, particularly in employment contracts, thanks to recent Supreme Court cases and a continued weak job market that favors employers.

Often, employees will sign employment contracts without realizing that they have also signed away their right to pursue a lawsuit in court. Arbitration clauses make it more difficult for employees to take their employers to court or join class-action lawsuits. Even worse, the arbitrator – the person who oversees the arbitration and decides its outcome – is generally hired by the employer. Not surprisingly, employers statistically win much more often in arbitration than they do in lawsuits. The same goes for consumer and commercial contracts, where arbitration clauses are often buried deep within the document.

For more information about the role arbitration clauses are currently playing in these contexts, as well as the recent court decisions which have made them all the more pervasive, see the following article recently published in the L.A. Times: http://articles.latimes.com/2013/jul/06/business/la-fi-scotus-employees-20130706.

In order to protect yourself from hidden arbitration clauses, be sure to thoroughly read any contracts before signing them. If necessary, contact an attorney for assistance. Finally, don’t be afraid to simply cross out an arbitration clause before signing a contract, particularly when dealing with consumer contracts.