Unconscionable Arbitration Clauses: Be Careful What You Include


Many employers lawfully require all employees, as a condition of employment, to arbitrate any disputes arising out of the employment relationship. Typically, such arbitration agreements include claims for wrongful termination, discrimination or harassment, wage and hour violations and the like, but they exclude workers’ compensation claims. By definition, the arbitration agreement forces the employees to give up a jury trial, although in many cases the employer agrees to pay the full cost of the arbitration. More recently, employers have added a clause by which employees waive the right to sue collectively in a class action, a controversial provision that will be the subject of a future post.

Can an employee who has been forced to agree to arbitrate claims ever get out of that agreement and bring an action in court before a judge and jury? The answer is yes, in the limited circumstance that a court holds the arbitration agreement to be unconscionable. What does that unwieldy word mean? It means simply that a court has determined that a contract is so overly harsh or one-sided that it cannot be enforced. Courts look to both procedural unconscionability—how the contract was formed—and substantive unconscionability—the actual terms of the contract—to determine if it should be enforced.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Topics:  Arbitration, Class Action Arbitration Waivers, Discrimination, Employer Liability Issues, Employment Policies, Hiring & Firing, Termination, Wage and Hour

Published In: Alternative Dispute Resolution (ADR) Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© JAMS, The Resolution Experts | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »