« Consumer can't be forced to pay for arbitration | Main | Arbitration Lesson #8 - What claims are covered? »
Arbitration Lesson #7 - Voluntary agreement
August 10, 2006 by Ross Runkel at LawMemo
An agreement to arbitrate is really a lot like any other contract. It has to be formed (created) in accordance with state law. Typically that means the employer makes an offer and the employee accepts the offer.
There has been a lot of controversy about whether employees have "voluntarily" accepted the employer's offer to enter into an arbitration agreement. This is because it often looks like the employer is "forcing" the employee to agree.
Examples:
- An employer tells a job applicant that there has to be an agreement to arbitrate, or the employer will not even consider the application. Anybody who wants to apply for the job has to either agree to arbitrate or go somewhere else.
- An employee is already working for an employer, as an "at will" employee. One day the employer announces that in order to stay on the job the employee has to sign an arbitration agreement. The employee has to either agree, or leave.
If the employee (or applicant) signs an arbitration agreement under these circumstances, most courts will say that the agreement was "voluntary." The courts see this as no different from someone going to get a car loan and being told that they get the loan only if they sign certain papers. The employee literally has a choice, even though it might look like the employee is being forced to sign.
Lawyers will often argue that being forced to agree means that the agreement is "unconscionable" and therefore not enforceable. However, most courts do not think an arbitration agreement is unconscionable unless it has some unfair clause in it, such as saying that the arbitrator cannot award the same damages that a court could award.
And what if an employee gets fired because he would not sign an arbitration agreement? A California court had such a case in which the discharged employee argued that this was a wrongful discharge in violation of public policy. The court held against him, saying there was no violation of public policy. Lagatree v. Luce, Forward, Hamilton & Scripps, 74 Cal.App.4th 1105 (California Ct App 1999).
In Prudential Insurance Co. v. Lai, 42 F.3d 1299 (9th Cir. 1994), the employee signed a "U-4 Form" that contained an agreement to arbitrate, but the document she signed did not mention employment disputes, she was not given a copy of the full arbitration agreement that was contained in a separate document, and the separate document itself did not refer to employment disputes. The court concluded that the employee "did not knowingly enter into any agreement to arbitrate employment disputes." A lot of other courts have indicated that they do not agree with this decision.
EEOC | NLRB | Supreme Court | Employment Law Blog | Arbitration Blog | Employment Law 101
