A Recent Decision by the United States Supreme Court Benefits Employers and is Harmful to Employees. Employees Should Understand the Terms of an Arbitration Agreement Before Signing


Earlier this week, the U.S. Supreme Court ruled that employees who agreed to arbitrate their claims and not to join a class action could not join together to enforce wage and hour claims. The Court determined that arbitration agreements, as written, should be upheld. The negative result of the Court’s decision is that many employees will not raise claims against their employers.

Arbitration clauses require the employee (or former employee) to resolve their claims in Arbitration rather than in Court. Employers like the arbitration process rather than Court because arbitration is confidential. Employers also like Arbitration because many employers feel that the cost of arbitration may result in less employees raising claims.

Many employees who have signed an arbitration agreement are concerned about the cost of raising claims against their employer in Arbitration. Where in Court, the employee is not required to pay the Judge for the Judge’s time, in Arbitration, the employee must pay an hourly rate for the Arbitrator’s time. Therefore, an employee bringing wage and hour claims may be prevented from doing so by the large cost the employee may have to incur to bring such claims. If employees were permitted to ban together to bring such claims, then it is more likely that the overall payout (if the employees are successful) would outweigh the costs incurred by the employee. It may not be cost effective for employees to raise claims on an individual basis. Specifically, the employee may be successful in obtaining damages, but still be out of pocket for the costs of the Arbitrator.

If an employee is asked to sign an arbitration agreement or an agreement with an arbitration provision, the language should be reviewed carefully. The employee should understand what is being agreed upon, what rights are being given up and what that may mean if the employee raises claims in the future. These provisions, like all other contract provisions, should be reviewed and negotiated.

To have your arbitration agreement or provision reviewed, contact Sheree Donath, Esq. at Sheree@DonathLaw.com.