Mandatory arbitration for discrimination claims: Is the agreement itself discriminatory?

Mandatory arbitration agreements, which require employees to take discrimination claims to arbitration rather than court, are common in employment contracts, especially in larger employers. Many of those contracts go a step further, including class-action waivers that prevent employees from taking collective legal action.

Now a survey from the Economic Policy Institute reveals that employees in low-wage jobs, women, and African-Americans are more likely to be subject to such agreements that any other group. The survey found that 65 percent of workplaces where the average wage is less than $13 an hour require mandatory arbitration agreements. This amounts to 57.6 of female workers, 59.1 percent of African-American workers, and 53.5 percent of male workers. The prevalence of such agreements, which has risen from 2 percent in 1991 to more than 55 percent of employees today, restricts access of employees to the courts for a variety of employment-related claims. Arbitrated claims overwhelmingly favor employers, according to the survey report.

In a case before the U.S. Supreme Court, the National Labor Relations Board determined that forced arbitration for work-related disputes violates employees’ rights under the National Labor Relations Act. If the Court upholds the finding, mandatory arbitration agreements cannot be enforced.

In October, the Court heard three cases challenging the lawfulness of class action waivers, putting hundreds of cases on hold at the labor board and in federal appeals courts. These cases are under close scrutiny given the spotlight on women coming together to speak out against sexual harassment in the workplace in response to the #MeToo movement.

On the other side of the argument, the U.S. Chamber of Commerce is urging the Supreme Court to uphold the legality of mandatory arbitration, claiming that workplace grievances are unique, and individualized cases can better be pursued in arbitration. According to the Chamber, employees fare as well in arbitration as in litigation, and that court often is too expensive to be realistic for employees filing claims.

The effect of these decisions will be far reaching, and we recommend that employers take a proactive approach, with periodic review of all employment contracts by attorneys that specialize in labor and employment law. This is particularly important for agreements containing an arbitration provision, as special requirements apply.  As always, we are happy to help.



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