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Law Tribune’s Editorial on “Downright Coercive” Employment Arbitration Clauses Is Off-Base

Posted in Class Actions, Highlight, Human Resources (HR) Compliance, Litigation

It’s hard to read the Connecticut Law Tribune’s Editorial this week on “The Problem of Workplace Arbitration Clauses” with a straight face. It is dripping with sarcasm, filled with sweeping generalities, and reserves its greatest enmity for employers and the lawyers that represent them.

If the editorial is to be believed, employers and their lawyers apparently routinely use “deceptive” arbitration clauses — often pushed by a “third assistant personnel clerk” — that are hidden until “defense counsel raises the jury waiver or arbitration agreement from its dusty grave in the company’s personnel files.”

But perhaps I’m overreacting. So let’s review the editorial more closely and try to separate fact from fiction.  The editorial, in its full unedited version, is in italics. 

Over the last decade, employers have more and more often incorporated jury waiver or mandatory arbitration clauses into their employment arrangements to avoid the perceived horror of facing jury review of the way they treat their employees. These clauses are often presented in circumstances that many argue are deceptive, if not downright coercive.

On the first premise — that employers are using arbitration agreements more – the editorial doesn’t provide numbers. But I’ll tend to agree with the notion that the use of arbitration agreements are increasing. However, most employers are not concerned with ”jury review.”  Just a handful of cases ever see a court room. Only 2.9 percent of federal employment cases even reach trial! The reasons for their use are complicated but part of it is that the cost of defending cases has skyrocketed. Indeed, from 2010 to 2013, the median time from filing to trial of a civil case in federal court in Connecticut has risen from 27.9 months to 35.7 months (nearly three years!).  Arbitration is much quicker and more cost effective for both sides.

As to the second premise — that the clauses are presented in circumstances that are “coercive” — I suppose that is up for debate. But it depends on your definition of “coercion”.  The legal definition of coercion typically means through “force” or “duress”.  The classic law school example of being forced to sign a contract at gunpoint is clearly “coercion.”  But an employee who wants a job and signs an agreement if he wants the job? In my view (and many courts), that is not ”coercion.”

But let’s agree to disagree on this point and move on.

Despite the significance of an employee signing away a legal right that lies at the very base of our civil justice system, there is almost never any effort to explain to the employee what the waiver or arbitration agreement means or even that they are giving up any right at all. In fact, quite the reverse is the rule.

“Almost never”?  That statement barely deserves any credence.  There is no evidence to support this statement.  And additionally, what does it mean to “explain to the employee what the waiver” means? Typically, the provisions state that any claim out of an employee’s employment must be submitted to arbitration instead of the courts. Isn’t that enough? (Yes, say the courts.)

Regardless, employers have been advised to make sure that arbitration agreements are highlighted and not merely stuck in page 32 of a handbook.

And the editorial seems to ignore the positive attributes that alternative dispute resolution can bring to the employee as well.  Arbitration has a place in our “civil justice system” too.  (Indeed, in a 2012 editorial, the Law Tribune voiced its support for passage of the Uniform Arbitration Act. The drafters of that act noted that “the enforceability of arbitration agreements cannot be treated any differently from the enforcement of contracts generally under state contract law” and avoided specific references to employment agreements.)

The statement of jury waiver or agreement to arbitrate is often either stuck at the very end of an online or hard copy application form or is presented as a separate document to the employee by a third assistant personnel clerk on the first morning of work as part of an orientation papers package that contains the W-4 form, the health, disability and life insurance election forms, perhaps, a lengthy personnel handbook with an attached receipt and acknowledgement of understanding form and any other documents the company feels it needs for its personnel file on the new worker.

Do any employers really have a “third assistant personnel clerk”?  I realize it’s exaggeration, but most of the forms that are filled out on the first day of employment are due to requirements set out by law — not because the employer relishes having the employee spend time filling out forms. The fact that arbitration agreements are required on the first day of employment is smart business; you need consideration for an agreement and a new job is pretty good consideration.  And if the agreement is presented as a “separate document” to the employee, isn’t that highlighting the fact?

These statements do not inform; they entrap.

Actually, according to court decisions in Connecticut, they don’t entrap.  I’ve covered them here, and here.

Whether submitted as part of an application form, on the first day of employment or at some other time, few, besides the most sophisticated, job seekers retain copies of the pertinent document.

That’s probably true. But do any of us keep documents from our first day of employment? No. And Connecticut is one of the few states that allow employees such unfettered access to their personnel files.

The jury waiver or arbitration language is couched in legalese that is just so much mumbo jumbo to the average job applicant or worker; no explanations are offered and the pertinent document is signed without any understanding of its meaning or importance by anyone except the company’s lawyers. It does not come up until most often long after the fact in the event that there is a dispute with the employer. Then defense counsel raises the jury waiver or arbitration agreement from its dusty grave in the company’s personnel files and the employee, or more often the employee’s lawyer, is informed of it.

Oh, where to begin?  The notion that all arbitration or jury waiver clauses are “couched in legalese” or filled with “mumbo jumbo” is almost offensive.  And it’s just not true.  It is well settled in Connecticut that “Where a person of mature years, who can read and write, signs or accepts a formal written contract affecting his pecuniary interests, it is his duty to read it, and notice of its contents will be imputed to him….”

Indeed, I couldn’t find a case in Connecticut where the court found arbitration language to be so complex that the “average” worker couldn’t understand it.   In one case, a District Court in Connecticut even found that strip club dancers agreed to arbitrate their claims with language that is fairly straightforward, despite arguments that they didn’t quite realize what they were doing.

While it’s admittedly hard to know what the “typical” language is, I would argue that the language used by many employers is a lot like the one a federal court in Connecticut was asked to review a few years ago.

It stated, “I understand that by continuing my employment with GameStop following the effective date of GameStop C.A.R.E.S., I am agreeing that all workplace disputes or claims, regardless of when those disputes or claims arose, will be resolved under the GameStop C.A.R.E.S. program rather than in court. This includes legal and statutory claims, and class or collective action claims in which I might be included.”  (The C.A.R.E.S. program was GameStop’s program that was also titled “Rules of Dispute Resolution Including Arbitration”.)

Again, maybe it’s just my legal training, but what is difficult for an employee to understand?

Today, jury waivers and arbitration agreements are routinely accepted by the courts.

Well, that’s increasingly true.  And for good reason, it makes sense.

The courts most often seem to assume that they are signed by sophisticated parties with real, mutual bargaining power. Sometimes this is true, but more often it is not. To pretend, as the courts seem currently to do, that the average applicant for a clerk’s job at a street-level retail establishment or for work making french fries in a fast-food restaurant understands the implications or the forfeiture of rights involved in a jury waiver or arbitration agreement approaches the absurd.

Do any of the major fast food companies require workers “making french fries” to sign arbitration agreements? (Sure, for some of the executives, but not many front-line workers.)

Before giving effect to any such agreement, the courts should require proof that the employee had an actual understanding of what the waiver or arbitration language meant, the rights that were being given up and that he or she freely agreed to that waiver as a condition of employment. In other words, the courts should require that the employer bear the burden of proving voluntary and knowing consent before giving effect to any jury waiver or arbitration agreement. We submit that few employers today could meet that burden.

And there we have it.  A wholesale change in contract law.

As one law review article  on “Employee Arbitration and Voluntary Consent” has rightly pointed out, mutual assent to a contract is a required element of any contract claim. But the voluntary nature of that assent — that is making sure to distinguish between consent that is voluntary and that which is coerced – has typically been kept in check by one of contract law’s defenses, namely, duress. It is a burden of the employee, not an employer.

The law review author concludes: “There is no more reason to abandon these doctrines when the contract in question happens to be an arbitration agreement.”  Indeed.  The change proposed by the Law Tribune’s Editorial is simply unreasonable and unncessary. Courts have been well-versed into how to handle these agreements.

A proposed bill in Congress would go even further. The “Arbitration Fairness Act of 2013″ would restrict the use of arbitration agreements in the employment context. But that’s not likely to pass anytime soon.

For employers, arbitration clauses and class action waivers can be a useful tool to help reduce exposure to costly litigation.  But the use of such agreements should be done in a proper legal manner.  As editorials like those from the Law Tribune show, the attacks on such agreements will continue to come.

  • ctemploymentlawyer

    One other point that another attorney brought up which I think merits a mention. Employers would be wise to advise applicants BEFORE they accept the job that arbitration will be required.

  • jackryan

    That 3 year “statistic” is in reality much closer to 5 years now.