Should I Sign an Employment Contract with an Arbitration Clause?

An increasing number of businesses are using arbitration clauses in their employment contracts to resolve disputes. What is an arbitration clause? How does it affect your rights? What are the implications of an arbitration clause if you have a dispute with your employer?

Though arbitration clauses are common practice, especially for medium and large sized companies, many employees remain unware of what they are signing. You may have signed an employment contract without realizing that you signed away your right to take your employer to court. This can significantly limit your options and potential remedies, especially if you were wrongfully terminated, suffered discrimination, wage and hour violations, or retaliation.

What is an arbitration clause?
Effectively, an arbitration clause stipulates that you agree to forego your right to pursue legal action against your employer in a court of law. Instead, you agree that your disputes will be resolved through a process known as arbitration. Arbitration is an alternative to litigation. Your claim is not heard by a judge or a jury, but by a neutral third party known as an arbitrator. Arbitration has several important implications.

What’s the problem with an arbitration clause?
For an employee, being forced to resolve a dispute through arbitration rather than the court system can limit relief. Further, since the dispute is not public, other employees cannot benefit from the decision. Juries are often more sympathetic to employees than an arbitrator would be. Arbitration usually means restricted evidence and fewer document requests, a disadvantage for employees who may need to access employer documents. Arbitration clauses often prohibit an employee from joining others in a class action.

Can a company force me to sign an arbitration clause?
Before you are hired, you may be asked to sign an arbitration agreement. Depending on your leverage during negotiations, you may be able to opt out of the arbitration clause. If you are entry or mid-level, it is unlikely you will be able to make such a modification to your employment contract. Always make sure to read and understand your contract in full before you sign it. An employer may rescind a job offer if you refuse to sign the arbitration agreement.

How can I negotiate my arbitration clause?
If you decide to sign an employment contract, you could seek to modify your arbitration clause. A very broad or restrictive clause may be modified to ensure you have just as much control over the arbitrator and arbitration process as the employer. Further, you can negotiate the contract to ensure the employer covers the cost of arbitration, as well as to reserve the right to an attorney and all available remedies.

Can I still file a lawsuit after arbitration?
A decision by an arbitrator will generally be binding and final between you and your employer. This means that even if you disagree with the ruling you are unable to pursue other legal remedies after the arbitration ends. A court case, on the other hand, can still go through the appeals process.

How do I protect my rights when signing an employment contract?
Wanta Thome Jozwiak & Wanta LLP represents employees in contract negotiation and is currently investigating legal claims related to wrongful termination, retaliation, discrimination and other employment law violations. We are dedicated to helping all employees in Minnesota protect their rights and pursue all available remedies in the event of employer misconduct. Please call 612-252-3570 to discuss your case with our St. Paul and Minneapolis employment law attorneys.