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Court Enforces Forever 21 Arbitration Agreement in Employment Contract

As corporations and individuals have continued to argue over whether companies can force its customers and employees into arbitration, the courts have been flooded with allegations of breach of contract, often accompanied by one of the parties pointing to an arbitration agreement.

An arbitration agreement is a clause included in a contract that requires the parties involved to settle any disputes in arbitration, rather than in court. Arbitration was originally intended to allow businesses to handle their disputes with other businesses without crowding the courts. But in recent years, corporations have been including arbitration agreements in everything from loan contracts to employment contracts. Bringing another business into arbitration to settle your differences is one thing, but individuals usually suffer from a distinct disadvantage when they try to go up against large corporations because they don’t have access to the same resources.

To make matters worse, arbitrators are not always the impartial third parties that judges and juries tend to be. There are arbitration companies that have a reputation for being fair and unbiased, but not all of them. Because arbitration companies are in business to make a profit, a tendency to rule in favor of the party that continues to bring them business, even if it’s an unconscious bias, is a common occurrence.

Many consumers and individuals have complained that arbitration agreements in their contracts should be unenforceable, either because they didn’t realize they were signing an arbitration agreement, or because they had no choice but to sign the contract. For example, many employers include arbitration agreements in their employment contracts, which they require their workers to sign as a condition of employment. For workers who need a job, “sign this or we won’t hire you” is hardly a fair offer.

Maribel Baltazar was made to sign an employment contract with an arbitration agreement as a condition of her employment when she started working for Forever 21 in California in 2007. The agreement stated that all disputes between the parties would be settled in arbitration, but that either party would have the opportunity to apply to a state court for provisional remedy, such as a preliminary injunction or a temporary restraining order.

After quitting her job at Forever 21 in 2011, Baltazar filed a lawsuit against her former employer, alleging she had been both verbally and physically harassed, had been discriminated against based on her race and her sex, and had suffered retaliation, which violates California labor law.

Forever 21 pointed to its arbitration agreement with Baltazar and asked the court to compel arbitration. Baltazar argued the agreement was “unconscionable,” and as a result, could not be enforced. In order to prove a contract is unconscionable, the plaintiff needs to provide evidence that one party had unequal bargaining power over the other.

Baltazar argued the provision in the arbitration agreement for applying to a state court for a provisional remedy was unconscionable because the employer would be more likely to take advantage of the opportunity to do so. She also argued the agreement was unconscionable because Forever 21 required her to sign it as a condition of her employment.

The California Supreme Court ruled against Baltazar, stating that the clause allowing either party to seek provisional relief, as is their right under California law, cannot be considered unconscionable simply because one party is more likely than the other to take advantage of the opportunity.

The court likewise determined that requiring an employee to sign a contract as a condition of employment is not enough to be considered coercion or manipulation. Baltazar knew what she was doing when she signed the contract of her own free will.The Chicago overtime lawyers at the Chicago Overtime Law Center are investigating unpaid overtime claims against large retail chains such as Petsmart, Officemax, Staples, Smart & Final, Apple, Walgreen’s, CVS, Urban Outfitters, GAP, Abercrombie & Fitch, Limited, Forever 21, Macy’s, Hollister, Gilly Hicks, Target, JC Penney’s, Lowes, Burlington Coat Factory, Marshalls, TJ Max, Victoria’s Secret, Nieman Marcus, Saks Fifth Avenue, Best Buy, Home Depot, Apple, Best Buy, Sears, K Mart, J.C Penney, Walmart, Costco, PetSmart, REI and other retail chains for misclassifying employees as managers, erasing or altering time sheets or time records, pressuring workers not to report or record overtime, failing to pay for time spent on security checks, and otherwise failing to pay workers for overtime and other wages. If you are the victim this practice call us at one of our offices near Addison and Prospect Hts. at (312) 869-4095 or contact us online.