Arbitration agreements are common in a wide range of settings, including as part of the onboarding of new employees at many businesses and organizations.
These agreements are legally binding contracts in which workers agree to resolve any potential disputes with their employers outside of the typical court process. Instead, the agreements typically describe the process through which disputes will go to private, third-party arbitrators.
Unfortunately, employers often use these legally binding contracts to protect themselves at the expense of workers. Arbitration agreements remove lawsuits – including those accusing employers of ripping off or discriminating against workers – out of the public eye and behind closed doors. Many employers, especially large companies that frequently use arbitration, structure arbitration agreements to tip the scales in their favor.
Here is what working people need to know: Your employer can fire you or decide not to hire you if you refuse to sign an arbitration agreement. Although the California legislature passed a law banning employers from forcing arbitration agreements on their employees, a federal court largely overturned it.
That said, there still are some important limits on arbitration agreements in California. They do not apply to certain transportation workers, and the deals can be thrown out if their terms are so harsh or one-sided to be considered unfair. And workers still have the right to take their employers directly to court in representative actions under the state’s Private Attorneys General Act.
At Justice Law Corporation, our California employment class action attorneys help people across the state fight to ensure that they are treated fairly on the job. We are proud to have a strong track record of success in wage-and-hour, discrimination, harassment, retaliation, and other cases.
It is important for working people whose employers ask them to sign arbitration agreements to understand what they are getting into. For workers who believe their employers are shortchanging them or otherwise violating their rights, it is vital to understand how arbitration agreements may affect their options for taking action.
How Arbitration Agreements Work
An employment arbitration agreement is a contract between an employer and an employee that requires most workplace disputes to be resolved through private arbitration rather than in court.
Arbitration is a form of private dispute resolution. Instead of filing a lawsuit before a judge or jury, the employee presents their claims to a third party called an arbitrator. The arbitrator hears evidence, reviews documents, listens to witnesses, and then issues a decision.
The problem is that the system is set up to give supposedly “neutral” arbitrators an incentive to side with employers in disputes. Employers typically pay the costs of arbitration. Large employers who force employees to sign arbitration agreements tend to be repeat players who hire the same arbitrators to handle disputes as they arise. This creates situations in which arbitrators may seek to win favor with employers to ensure they are hired again.
Another problem: Arbitration agreements typically include class-action waivers. A class action is a type of lawsuit in which one or more people file a claim on behalf of a larger group of people who have similar legal issues. Class actions are frequently used by large groups of workers who have been shortchanged or had their rights on the job violated.
Class action waiver provisions require employees to pursue any claims individually rather than join forces with co-workers. Employers are desperate to avoid class actions because they give employees the power to join together and level the playing field.
Most arbitration agreements are governed by the Federal Arbitration Act, a federal law that strongly favors enforcement of the deals. Courts routinely uphold these agreements, including class action waivers, even when employees argue they had little bargaining power when signing them. Judges generally will not throw out agreements unless the deals are so unfair that they cannot be enforced.
Legislators in California have repeatedly tried to ban employers from forcing workers to sign arbitration agreements. But courts have ruled that such state laws are largely preempted by the FAA.
One notable exception is for transportation workers, who are not covered by the FAA. Courts in California and across the country have ping ponged complicated questions about who qualifies as a transportation worker and therefore cannot be forced to sign arbitration agreements in the Golden State.
California Workers Can Still Join Together in PAGA Suits
There is some good news. Workers can still take their employers to court in California over certain wage-and-hour and other violations, even if they have signed arbitration agreements. They can seek compensation collectively on behalf of groups of their coworkers for failure to pay minimum wages or overtime rates, among other claims.
California’s Private Attorneys General Act is a unique law that gives workers in the state the power to sue employers for pay and other workplace violations. A worker bringing a PAGA case essentially stands in the shoes of the state, acting as a “private attorney general” to enforce labor and employment law.
PAGA claims are similar to class actions in that they seek to collectively enforce the rights of large groups of workers. There are, however, some key differences, especially regarding the remedies available in these cases.
The key distinction is that in California, an arbitration agreement generally does not wipe out a representative PAGA action altogether. Employees who signed an arbitration agreement may still pursue representative PAGA claims in court on behalf of other affected workers.
Our California Employment Class Action Attorneys Can Help
If you believe that your employer is violating your rights on the job, whether it is by being underpaid or in other terms and conditions, you do not need to go it alone. A California employment class action attorney at Justice Law Corporation can help you evaluate your claim and understand your rights and options. Contact us at (818) 230-7502 to schedule a free consultation with a California employment class action attorney.
