Mandatory arbitration agreements have become increasingly common in the workplace, with many employers including them in their employment contracts. These agreements require employees to waive their right to pursue legal action against their employer and instead submit to arbitration for any disputes that may arise in the workplace.
While mandatory arbitration agreements are legally enforceable in many cases, there are several factors that can impact their enforceability. In this article, we will discuss some of these factors and what they mean for employees and employers.
The Federal Arbitration Act
The Federal Arbitration Act (FAA) is a federal law that governs the enforceability of arbitration agreements in the United States. The FAA generally favors arbitration as a means of resolving disputes, and courts are generally required to enforce arbitration agreements under the FAA.
However, there are some circumstances in which courts may refuse to enforce arbitration agreements. For example, if an arbitration agreement is found to be unconscionable, meaning it is so one-sided or unfair that it is essentially unenforceable, a court may refuse to enforce it.
Unconscionability
Unconscionability is a legal term that refers to an agreement that is so one-sided or unfair that it shocks the conscience. In the context of mandatory arbitration agreements, an unconscionable agreement may be one that is overly restrictive, overly burdensome, or otherwise unfair to employees.
For example, an arbitration agreement that requires employees to pay all arbitration fees and expenses may be found to be unconscionable if those fees are prohibitively expensive for the employee. Similarly, an arbitration agreement that requires employees to waive their right to a jury trial or to participate in a class action may also be found to be unconscionable.
State Laws
In addition to the FAA, there are also state laws that may impact the enforceability of mandatory arbitration agreements. Some states have laws that make it more difficult for employers to require employees to waive their right to pursue legal action.
For example, California has a law that makes it more difficult for employers to require employees to sign mandatory arbitration agreements. Under California law, mandatory arbitration agreements may be unenforceable if they are found to be unconscionable or if they are part of a contract of adhesion, meaning the employee had no bargaining power and was required to accept the agreement as a condition of employment.
Conclusion
While mandatory arbitration agreements are generally enforceable under the FAA, there are several factors that can impact their enforceability. If an arbitration agreement is found to be unconscionable or if there are state laws that make it more difficult for employers to require employees to sign mandatory arbitration agreements, a court may refuse to enforce the agreement.
As an employee, it is important to carefully review any arbitration agreement before signing it and to understand your rights. As an employer, it is important to ensure that any mandatory arbitration agreements you use are fair and reasonable, and that they comply with all applicable laws and regulations.