New York State Assembly Takes Step Against Forced Employment Arbitration

On May 5, 2014, the New York State Assembly passed legislation forbidding the State from contracting with any business that requires employees to arbitrate claims arising from violations of Title VII of the Civil Rights Act. Should this bill win the support of the State Senate and be signed into law by Governor Cuomo, New York State would be taking a step in the right direction, towards fair employment conditions for workers and away from forced arbitration.

Forced employment arbitration clauses require American employees to sign away their fundamental right to a trial by jury; countless workers do so without even knowing what rights they are giving away. Many employers require employees to sign overarching employee handbooks, and within that handbook is a short clause stating that the employee has agreed to arbitrate any legal issues that may arise out of the course of his or her employment. Consequentially, when an employee is discriminated against, wrongfully terminated, or otherwise injured by their employer, the employee has lost the ability to take the employer to court, and instead must submit to arbitration.

The federal government began favoring arbitration in 1925, with the passage of the Federal Arbitration Act. At that time, arbitration was typically used to settle disputes between two parties of equal bargaining power. Over the last few decades, however, courts have expanded the application of the FAA to validate agreements between parties of vastly different bargaining power – such as employers and employees – entered into before any dispute exists. Typically, when faced with such an agreement, a worker has only two choices: agree to it, or find another job. Given those options, the worker really has no choice at all but to agree to sign away their rights.

Forced arbitration is disfavored by many commentators because it requires employees to forego many of the safeguards fundamental to the American legal system, including a public trial, the right to a jury of one’s peers, and the right to an appeal. Additionally, the results employees get in arbitration are generally worse than their results in litigation, both in terms of employee success rate and the damages awarded. Employers typically select an arbitrator or arbitration agency that they know to be business-friendly, and that they have had prior success with. In turn, many of these arbitrators depend on these employers as a source of revenue, and are therefore less likely to rule against them.

Several legislative attempts have been made recently to try to level the playing field for employees. In 2013, the Arbitration Fairness Act was introduced in Congress; this is only the most recent time a bill of that name was introduced, prior Arbitration Fairness Acts were introduced in 2007, 2009, and 2011. The act would, among other things, bar pre-dispute arbitration agreements in the employment arena, in effect making employee handbook arbitration clauses illegal. The previous Arbitration Fairness Acts similar to this one have died in Congress – whether this bill will fare any differently remains to be seen.

The New York bill mirrors a federal law enacted in 2010, barring defense contractors and subcontractors from receiving federal funds if they require arbitration of Title VII or sexual assault claims.

If you believe that you have been the victim of workplace discrimination, please contact the Harman Firm, LLP.