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Divide in Federal Courts Continues on Arbitration Issues

The divide between the federal circuit courts that support arbitration agreements in employment contracts and those that don’t continues with the Fifth Circuit Court’s recent decision to uphold its previous rulings in favor of arbitration agreements.

Arbitration was developed as a way for businesses to settle their disputes between each other outside of the court, but companies have increasingly been including arbitration agreements with their customers and employees.

The problem with requiring individuals to agree to settle all disputes in arbitration is that arbitration is designed for businesses, not individuals, and so it disproportionately favors businesses. To start with, arbitration is not designed to be able to handle class actions, which means every claim filed against a company in arbitration has to be brought individually. Because most individual claims against a company are relatively small, the cost of bringing the complaint to arbitration exceeds the amount of the claim more often than not.

Because arbitration is handled privately, it also prevents other similarly-situated employees from learning when one of their coworkers has succeeded in attaining compensation for a claim they brought against the company. Because so many employees are unaware of all the labor laws protecting them, they are often unaware of all their rights as workers, and class action lawsuits can be an extremely effective way to alert fellow employees when their rights may have been violated.

Finally, arbitrators are not always the neutral third parties that judges and juries are designed to be. Although there are a number of arbitrators who maintain a reputation for being fair and unbiased, at the end of the day, they are also companies in business to make a profit and, as a result, can be biased towards the party that tends to bring them a lot of business, even if the arbitrator is not consciously aware of this bias.

The National Labor Relations Board (NLRB) has consistently ruled that employment contracts that include arbitration agreements unfairly benefit employers and prevent workers from exercising all the rights the law provides them. The Seventh Circuit Court recently ruled in line with the NLRB’s findings, and since then, the NLRB has urged other appellate courts to do the same, but so far, the Fifth Circuit Court has refused to do so.

Recently, the NLRB ruled against Citi Trends, finding that by including arbitration agreements in its employment contracts, the retail clothing chain was violating the National Labor Relations Act (NLRA). Citi Trends appealed that decision and asked the Fifth Circuit Court to overturn the NLRB’s decision, which the circuit court did.

In its ruling, the Fifth Circuit Court noted two similar cases in which its published decisions had stated that including arbitration agreements in employment contracts is legal and does not overly restrict the rights of the employees. The Circuit Court pointed out that it was obliged to adhere to its previous rulings.

In its arguments, the NLRB had acknowledged that a ruling in accordance with its decision would contradict the Fifth Circuit Court’s previous rulings, and it has also asked the court to reconsider those decisions, but that request was denied.

The Chicago class action and employment law attorneys at the Chicago Overtime Law Center have three decades of experience fighting to help employees who are victims of wage, overtime and tip theft by their employers. We have a team of Chicago unpaid overtime lawyers who concentrate on prosecuting state and nationwide class action lawsuits. Our attorneys work out of Chicago and Oak Brook offices and pursue claims for workers all over the Chicago area including Hoffman Estates and Schaumburg We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Kendall, Lake, McHenry, Kane and Cook Counties.

Our Orland Park and Bollingbrook overtime and employment lawyers are intimately familiar with the issues that arise during wage claim litigation, and we know the laws that govern overtime cases well. Many employers mis-classify employees as being exempt from overtime laws and pay workers salaries instead of hourly wages in order to avoid paying them overtime. Some employers mistakenly classify employees as exempt and others intentionally do so in order to circumvent the law. In either case, workers do not receive the wages they should, and a lawsuit may be the only way to recover their earned wages.

The Chicago Overtime Law Center is based in Chicago and Oak Brook, and represents clients throughout the country who have unpaid overtime and other employment right claims.