March 7, 2012 at 11:15 AM ET
A group of servers at Hooters are claiming they weren’t given proper breaks and were swindled out of their tips, among other labor law violations. But when they tried to sue as part of a class action their employer pulled the rug out from under them.
The servers, it turns out, had signed an employment contract and in the fine print — which so few employees read — it said they were obligated to go to arbitration, a process to resolve disputes outside of court.
In the end, this story worked out for the servers because Hooters didn’t ask to go to arbitration in a timely manner, according to a district court ruling last month. But most employee-employer disputes like this don’t work out this way.
A case involving a chef at a fancy steak chain, Morton’s, wanted to sue his employer for sexual harassment, and he claimed that “one Morton’s chef would remove asparagus from his genitals and serve it to the restaurant’s paying customers,” according to an MSNBC.com story. The chains owners are now trying to force him into arbitration saying he signed an employment agreement that clearly stated he had to go through arbitration.
More and more workers are unwittingly signing employment agreements that require them to waive their right to a lawsuit and agree to arbitration. The process, according to some legal experts, is skewed in favor of employers who typically hire the arbitrators who handle the disputes.
For many it’s an unfair David-and-Goliath match up, and it can be expensive for workers.
There’s a great op-ed piece in the New York Times today by Amalia D. Kessler, a professor of law and legal history at Stanford University, and she takes aim at the process, calling it unfair to employees and consumers who are ignorant to what they’re actually agreeing to.
“If you’re lucky, nothing goes wrong. But a growing number of consumers and job seekers discover, when something does go wrong, that they have unknowingly agreed to waive their right to file a lawsuit. Instead, they must submit to arbitration.”
She pointed out that 93 percent of employment contracts now have such mandatory arbitration clauses.
So what are these clauses exactly? Here’s a good definition of arbitration agreements I found on Definitions.USLegal.com:
Arbitration agreement is a written agreement between the parties to a dispute to designate a particular arbitrator to resolve their disputes arising out of a particular business relationship. It calls for a mandatory arbitration before an arbitrator. An Arbitration agreement is usually legally binding. Companies often require employees to sign an arbitration agreement which prevents the employee from suing the company in court. Arbitration agreements are unsafe to employees because they often require an employee to pay thousands of dollars to file a claim with an arbitration association where s/he could have paid a few hundred dollars, or in some cases nothing at all to file in court.
This is a tough situation for employees who are desperate to find or keep their jobs. If they refuse to sign away their rights to sue and agree to arbitration there is nothing from keeping an employer from not hiring or firing you.
There is legislation on the table called the “Arbitration Fairness Act” that states: “no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment, consumer, or civil rights dispute.”
And there’s a recent National Labor Relations Board decision that may derail the validity of such contracts under collective bargaining laws. Many of these agreements call for an single worker to go through the arbitration process. So basically, if a group of employees feel they have been wronged, they wouldn’t be able to band together not only in a lawsuit, but also during the arbitration process.
The NLRB cried foul in this group restriction in a recent case.
An article about the ruling in The National Law Review said:
The NLRB found that the arbitration agreement unlawfully restricted the employees’ substantive rights to engage in concerted action for mutual aid or protection under the NLRA, reasoning that collective and class actions are at the “core” of what Congress intended to protect in the NLRA.
It’s too early to tell how this ruling, or the Arbitration Act, will play out for employees, but for now workers everywhere should be aware of the rights they’re signing away.
This story originally appeared on CareerDiva.net under the headline, "Did you give up your right to sue the boss?"