Many employers want their employees to sign “arbitration agreements” requiring disputes that arise in the workplace be resolved through arbitration rather than in the courts. Arbitration is decided by a neutral third person, often a retired judge, who makes the decision as to the dispute. This means a jury will never hear your case.
This kind of agreement in the workplace have become commonplace. Employers use these agreements, because they believe the agreement will prevent disputes from going to the courts and result in more favorable treatment of employers. It is widely believed that arbitration is less expensive than courtroom litigation; however, that question is up in the air.
In the course of normal litigation, a lawsuit is filed by an employee. The employer typically pays out thousands of dollars to their attorneys to defend the court action brought by the employee. At some point the case may go to arbitration hearing unless it is settled along the way. In a California employment arbitration setting, the employer must pay most of the case costs and in many cases, the costs are more than the employer would pay in the courts.
The risk to employers is potentially greater in arbitration than in the courts. Particularly in cases involving nonpayment of overtime, the prevailing employee can recover attorneys’ fees, but the prevailing employer does not usually recover their attorneys’ fees. Worse for the employer, if they get an unfavorable decision against them by the arbitrator, the decision is usually non appealable.
There may be many reasons why employers want employees to sign arbitration agreements. The advantage for an employer in the this setting is that there is no jury, which is good because juries are unpredictable. While some studies indicate that employees win larger awards in a court trial, there is little evidence that the employers would have done better in arbitration.
There are some advantages to the employee in arbitration. Arbitrations are less formal than the court process and usually take less time than it would take to get to trial. If you’re required to sign such an agreement to obtain or keep your employment, you may want to have an attorney review the agreement and give you advice as to whether or not you should agree to the provision.