Dolan: Predispute arbitration deny employees’ rights

This week’s question comes from Janet D. in Mill Valley (I’m so glad the North Bay is reading the Examiner), who asks:

Q: “I work for a tech company in San Francisco, I am being unfairly harassed and discriminated against because of my disability. I was reading my handbook and it says that if I want to seek legal action for a violation of my fair employment rights, I have to go to arbitration, waive my right to a jury trial, pay for half of the costs and that I can only recover my lost wages but not any pain and suffering or punitive damages. Yet they “reserve the right” to sue me in court for any claim that I have interfered with their IP rights. Is this true, can they take away my rights like this?”

A: Janet, compulsory predispute arbitration provisions in employment applications are horrible things and are becoming ever more prevalent. Arbitration is a private adjudication of disputes, most often decided by one “neutral” arbitrator without the benefit of a judge, jury or even a factual record of the proceedings.
These arbitration agreements are presented to employees as a precondition to employment: Sign it or no job.

Most people sign them without reading or understanding what rights they are giving up. You probably signed one.

Employers like arbitration because arbitrations are private and closed to the public providing secrecy for the employer. Additionally, arbitrations statistically result in lower overall average damage awards than a public trial in front of an unbiased judge and jury of one’s peers.

I am OK with arbitration agreements wherein two parties can voluntarily determine if they want their dispute submitted to arbitration after they know the nature of the dispute and what is at stake. Then a reasoned decision can be made. Compulsory predispute arbitration takes away important constitutional rights before one even knows the nature of the dispute. When it comes to employment discrimination claims or significant injury claims, in 90 percent of the cases, I advise my clients that a jury of one’s peers is far superior to arbitration.

A jury hears one case whereas an arbitrator hears many. While it may sound like arbitrators would then have more experience, the dangers outweigh the benefits. For example, an arbitrator wants to get repeat business — that’s how they make their living. They want large corporations to use their services again. A jury doesn’t ever expect to be involved in deciding another action involving the same parties. So arbitrators are, consciously or unconsciously, biased and desirous of being in the favor of repeat players which are the companies, not the employees.

An arbitration agreement is a form of contract. California Code of Civil Procedure Section 1281 states: “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” For a contract to be enforceable it must meet many tests including a test of fairness. Contracts which are between parties of unequal bargaining power, which are presented as “take it or leave it” may be so onerous that they become contracts of adhesion.

Generally speaking, contracts of adhesion are those that do not fall within the reasonable expectations of the weaker or “adhering” party. A contract, even if consistent with the reasonable expectations of the parties, may be also denied enforcement if it is unduly oppressive or
“unconscionable.” Unconscionability may best be defined as unbearably unfair.

The courts have held that claims of employment discrimination may be compelled to arbitration if there is an enforceable arbitration agreement. To be enforceable, the agreement must: 1) clearly indicate that you are waiving your right to a jury trial; 2) be mutual: they can’t force you to arbitrate your claims while reserving the right to sue you for claims that they may have; 3) not limit your right to obtain discovery of documents or facts including deposing witnesses; 4) not place financial burdens on you, such as paying the arbitrator, which you would not face in a State Court action; and 5) provide the same kind of relief from an arbitrator as you would in court — including damages for pain and suffering and punitive damages if applicable.

Your limited statement of facts leads me to believe that your arbitration agreement may be an unenforceable, unconscionable, contract of adhesion. Have a good trial lawyer review the agreement. In the revolutionary war people fought and died for the 7th Amendment right to a jury trial. Don’t give up your constitutional rights without a fight!


Christopher B. Dolan is owner of the Dolan Law Firm. Email questions to help@dolanlawfirm.com.

Christopher B. Dolan
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