Is it common for an employer to require new employees to sign an agreement to arbitrate all claims? Seems odd. Should I sign it?

The document states, "the Employer and the employee mutually consent to the resolution by arbitration of all claims or controversies whether or not arising out of employment or termination that the Company may have against the employee or that the employee against the Employer. The claims cover, but are not limited to, wages, breach of contract, claims of (any and all types are listed) discrimination or harassment, claims for benefits, and claims for violation of any law, statute, regulation or ordinance. (Only exclusions are claims for workers comp or unemployment benefits)." Is this a red flag about possible past cases of discrimination/harassment or is the company just trying to limit its liability? And what typically constitutes grounds for an employer to sue an employee?

Newport Beach, CA -

Attorney Answers (4)

Michael Robert Kirschbaum

Michael Robert Kirschbaum

Employment / Labor Attorney - Irvine, CA
Answered

Forced arbitration agreements have become an increasingly commonplace provision in employment agreements, as well as many other facets of our lives, whether you realize it or not. If you see a doctor, applied for a credit card, signed up for a phone service, or even clicked "I agree" on the multitude of on-line contracts you never read, it is likely you have agreed to arbitrate any dispute you have with the other party.

Many employers now require employees to sign such agreements, as a condition of employment. If drafted properly, they are legal and binding. The U.S. Supreme Court has stamped its approval of such agreements, although California courts have been a little more restrictive, where it can be shown that the contract is "unconscionable".

Attorneys who represent employees despise these agreements, first, because they really are not voluntary agreements, second because it forces employees to give up their right to a trial by jury, in the event an employee's legal rights have been violated. Employers would much rather have legal claims decided by a retired judge or professional arbitrator, for reasons I will not get into here. They will claim the process is good for the employee too, because the process is cheaper and quicker. But that is not usually true.

An attorney would have to review your proposed agreement to offer an opinion whether it appears to be legal and binding. You can sign it with the hope you never need to find out whether it can be challenged in court. Or you can refuse to sign it and probably not get hired. But be aware that you can expect to see these kind of agreements with increasing regularity.

As a side note, the National Employment Lawyers Association (NELA) annually sponsors bills proposed in Congress designed to limit the use of such agreements. It has some very limited success. Until we get the political wherewithal to, at the very least, make such agreements truly voluntary, this is going to become a threat to our civil jury system as we know it.

They say you get what you pay for, and this response is free, so take it for what it is worth. This is my opinion... more
Michael Charles Doland

Michael Charles Doland

Business Attorney - Los Angeles, CA
Answered

It is not uncommon.

I regularly advise my clients against signing, if possible (i.e. they don't need or want the job.) The person filing either a lawsuit or arbitration is usually the one who has suffered financial damage. By forcing that person to post fees for filing arbitration and for the arbitrator(s), the damages become more 'expensive", not less. I do not find arbitration necessarily faster than litigation.

It is not necessarily a sign of past discrimination, or other matters. Employers very rarely sue employees for many reasons, one of which is the likely impossiblity of recovery even if the employer obtains a judgment.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may... more
Nicholas Basil Spirtos

Nicholas Basil Spirtos

Construction / Development Lawyer - Montclair, CA
Answered

Like the others said, arbitration agreements are becoming more and more common. You do not have to sign it, but you may be denied a job if you don't sign. There is no harm in asking the employer if you have an option. If he says no, and you want the job, you will have to sign off on the arbitration clause.
Arbitration clauses are often used as a powerful tool to protect the person providing the contract. A good arbitration clause can keep a company out of small claims court, out of superior court, and provide more control over who decides disputes. Having an arbitration clause does not necessarily mean the employer has been sued before, just that he foresees the possibility of it happening, and being pro-active in controlling his future, at least to some extent.

Pajman Jassim

Pajman Jassim

Employment / Labor Attorney - San Diego, CA
Answered

I don't like arbitration. Jury trials with rights to appeal are better, especially for the employee.

This answer does not create an attorney-client relationship between Jassim & Associates or any of its attorneys.... more

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