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. Continue reading