Mandatory Arbitration ← CELA VOICE

Bill protecting workers from forced arbitration awaits Governor approval

Sep

2015

What good is a law designed to protect your rights in the workplace if your employer can coerce you into waiving those rights as a condition of employment? Not much good at all. But the good news is that a recent bill passed by the California Legislature will prevent unscrupulous employers from strong-arming workers into waiving important rights.

AB 465, which is awaiting the Governor’s signature, would ban the practice of requiring workers to waive any of their rights, forums and procedures guaranteed by the California Labor Code. The “forum and procedures” language is critical, because it targets the widespread practice of forcing employees to sign mandatory arbitration clauses. Ending this abusive tactic is at the heart of what AB 465 seeks to accomplish.

Arbitration clauses are everywhere: in credit card agreements, in hospital admission forms, and in any number of lengthy, legalistic documents you routinely sign without bothering to read. But arbitration clauses have become especially prevalent in the workplace. Under current California law, your employer can fire you if you refuse to agree to submit all of your employment-related disputes to arbitration.

What’s wrong with arbitration? Nothing at all, if the decision to arbitrate is made knowingly and voluntarily by all parties. But coerced arbitration is inherently unfair to the employee and skews the balance of power further in the direction of the employer. Instead of having your dispute heard by a court or state agency – institutions relatively immune to undue influence by the employer – your case will be decided by an individual paid by the employer, pursuant to a process designed by the employer or by the arbitration provider selected by the employer.

Do you want to go to the Labor Commissioner or other state agency over wage, working conditions or occupational safety issues? Too bad. You’ve agreed to private arbitration. Do you want to band together with co-workers and file a class action to address wage theft, misclassification, or other issues best decided on a collective basis? Too bad. And if you’re an immigrant worker with a limited command of English, you may not even know that you’ve agreed to private arbitration. Again, too bad. Still enforceable.

But not if Governor Brown signs the bill. If it becomes law, this bill will prevent employers from coercing you to waive any right guaranteed by the California Labor Code as a condition of employment, including your right to take your employer to court or file a complaint with a government agency.

This bill doesn’t solve all the problems workers face in the world of mandatory arbitration since it only applies to Labor Code violations. That means it does not apply to workplace anti-discrimination provisions, which are part of a separate Code. You can still be fired for refusing to submit your discrimination, retaliation or harassment claims to arbitration. For now.

Mandatory arbitration may be an idea whose time has come and is now, finally, going. Last year, the California Legislature passed a bill prohibiting mandatory waivers of the right to go to court for certain “hate crimes.” President Obama signed an Executive Order prohibiting employers with federal contracts from requiring their employees to sign mandatory arbitration clauses. AB 465 is an important next step in what workers’ rights advocates hope will be the dismantling of the mandatory arbitration machine employers have constructed.

About Curt Surls

Curt Surls has been practicing in Los Angeles, specializing in employment law, for almost 25 years. Mr. Surls is a Fellow of the American Bar Foundation, a non-profit professional association honoring lawyers whose careers have demonstrated dedication to the welfare of the community and the traditions of the profession. Prior to opening the Law Office of Curt Surls in July 2012, he was a partner with Bornn & Surls for over 15 years. Mr. Surls was also an attorney with the Oakland civil rights firm then known as Saperstein, Seligman & Mayeda, specializing in employment and civil rights class actions. Mr. Surls also worked for the Department of Industrial Relations and the Legal Aid Foundation of Los Angeles.

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When merely considering your rights can get you fired!

Aug

2014

By Afshin Mozaffari

Employers may be reluctant to admit that their policies are designed to shut workers out of our civil justice system. But there is no denying their intent.

Consider this example. Elizabeth is a widow with five children who came into my office this spring. Since the death of her husband a few years ago, she immersed herself in her work to provide for her family. Elizabeth didn’t earn much at her job, but her work as a waitress was enough to support her children. She had been working for a California-based restaurant chain for nine years.

During a Friday shift last year, Elizabeth was informed about a new kind of company policy – an arbitration agreement that she was told she had to sign and return by Monday. Elizabeth tried to find an attorney over the weekend to explain the document to her, and when she couldn’t, she asked her employer for more time to review the agreement. She was fired a few days later for missing the 72-hour deadline. The company also fired several other employees for either declining to sign the arbitration agreement or not doing so by the company-imposed deadline.

Elizabeth’s case is not uncommon, but it underscores just how much “free choice” goes into these “agreements.” Remarkably, courts have held that terminating employees for not signing employer-mandated arbitration agreements is not illegal. These and other decisions are beginning to reach their absurd conclusions, where courts enforce arbitration agreements without regard to the rights of the affected individuals, enforcement of our laws, or the administration of justice. As Judge Jack Zouhary (a George W. Bush appointee) recently wrote in an order compelling arbitration of an antitrust claim, “This Court is bound by case law’s pro arbitration bent … common sense plays no role.”

Compulsory private arbitration has been the favored corporate practice for years. It is easy to understand why. Highly-paid private arbitrators, whose livelihood often depends on the repeat business from the same large corporations, render “justice” to an aggrieved employee who almost certainly will never appear before them again. The inherent disadvantage for low wage workers facing off against multi-million dollar corporate employers in any setting is obvious, but the disadvantage is compounded in an arbitral forum. Despite this, our courts have generally enforced these “agreements.”

I often see aggrieved employees who have signed arbitration agreements without understanding the content or the significance of the document. They sign the documents that their employers put in front of them, in order to continue working and to feed their families. In fact, most workers don’t learn what the term “arbitration” means until they consult with an attorney and learn that they have already signed away their right to seek justice in a court.

But the compulsory nature of these arbitration agreements is undeniable when we look at the employees that don’t blindly “agree” to an employer’s mandatory arbitration policy, or those like Elizabeth who merely ask for time to conduct a careful review and to consider their rights before agreeing to sign them away. If there was any question whether such “agreements” are a condition of employment, Elizabeth’s experience offers the answer.

Are we beginning to see the end to these extreme practices? On July 31, President Obama signed an executive order prohibiting certain federal contractors from forcing their employees out of court and into arbitration in workplace discrimination cases.

Although this executive action is a step in the right direction, it does not go far enough. Congress continues to ignore this systematic denial of justice to our workers by failing to move forward on the Arbitration Fairness Act, which has been pending since last year. The Act would ban forced arbitrations in employment and consumer settings. Until workers have a real choice in deciding where to claim their rights, the scales of justice will remain unbalanced.

Pillage in private: Raiders try to punt cheerleader wage claims into arbitration

Apr

2014

Oakland Raiderettes Lacy T. and Sarah G. filed suit against the Oakland Raiders for various labor law violations.

Employee and consumer advocates have been screaming for years about the harsh realities of arbitration clauses. We’ve decried them for being secret; for being unfair; and unconscionable and unconstitutional. Like the frog in the slowly heated pot of water, the public has remained idle in the face of an unprecedented erosion of their rights. Traction in the media has been hard to come by, and it has been worse among Congressional leaders.

Turns out all we needed was a little pom-pom pizazz. The media has latched onto the allegations being made by Lacy T., a former Oakland Raider cheerleader and member of the team’s Raiderettes. Lacy T. has filed a class action lawsuit (check another example of class action trials – Xarelto lawsuits) against the Raiders for wholesale violations of the California Labor Code – failing to pay minimum wage for all required hours worked, failing to pay overtime, failing to provide mandated meal and rest breaks, making illegal deductions from wages for a laundry list of “infractions,” as well as for costs the employer is required to cover, and failing to pay wages on time.

The case has garnered an extraordinary amount of attention, considering the abuses alleged are endemic to low wage positions in many industries. Undoubtedly, the intense media interest is fueled by the NFL’s high profile, the fact that every story provides an opportunity to display pictures of the Raiderettes in uniform, and the prospect that this wage dispute may provide titillating details of the Raiders’ demeaning treatment of its cheerleaders. As the NFL knows, sex sells. Even if it doesn’t pay enough to buy gruel.

The latest Dickensian twist in Lacy T.’s case occurred last month when the NFL moved to have the minimum wage claims taken out of a public courtroom and put into a secret arbitration to be presided over by its $44 million man, NFL Commissioner Roger Goddell. The claims in the case, and the Raiders’ response, show just how much the team’s management has turned its back on a proud history at the cutting edge of employment civil rights. Al Davis was the first NFL owner to hire an African-American head coach (Art Shell), a Latino head coach (Tom Flores) and a female CEO (Amy Trask). But by invoking an arbitration clause unilaterally imposed on its Raiderettes, and pushing Lacy T.’s case into a secret arbitral forum, the Raiders have perverted another of the late Mr. Davis’ ends-means mottos: Just Win, Baby.

Arbitration was originally conceived by Congress in the 1920s as an alternative mechanism to resolve business disputes. In the years since, it has steadily been perverted into a means for businesses to steal from and cause injury to individuals without any real threat of liability or significant financial consequence.

It is no small irony that secret arbitration has been championed at the highest level by Supreme Court Justice Clarence Thomas. Twenty three years ago, during Thomas’ Supreme Court confirmation hearings, Anita Hill publicly accused Thomas of sexual harassment. Her testimony (and the appalling questioning by the Senate committee) riveted the country. Through her courageous actions, the entire country awoke to the existence of sexual harassment in the workplace.

Today, Professor Hill has been making the rounds publicizing “Anita,” a new documentary about the experience. Two decades after exposing an insidious workplace problem on the national stage, she is asking a new generation of workers – women and men – to consider the lessons of those hearings.

Which brings us back to Lacy T. Yes, the media is just as itchy today to publish salacious details about the Raiderettes as it was to report on Clarence Thomas’ crude statements in 1991. The difference today is that the media may not be given any such opportunity to cover the details of a modern scourge for low-wage workers: wage theft. And as long as workplace problems – of any kind – are denied public scrutiny and forced into secret star chambers, progress will be elusive. “Anita” reminds us that public testimony can be painful. But it’s often how change is made.

About Christian Schreiber

Christian Schreiber is a partner at Chavez & Gertler, where he works primarily on class actions involving employment and consumer rights, civil rights, and financial services matters.

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Nelson Mandela and the importance of civil justice

Dec

2013

By Mark Kleiman

The memory of Nelson Mandela is being honored for his courageous and deeply dignified stance while imprisoned, and for his astute and successful efforts at reconciliation and nation building when he was finally released in his 70s.

Very few people remember that the man who helped lead a revolution was not always ready to die for his cause. Sixty years ago, Nelson Mandela was a civil rights lawyer in the only African-run law firm in South Africa. He represented victims of police brutality and the overbearing racial authority in his country. The white-run government could not tolerate these challenges and used the apartheid laws to force the firm to move out of downtown Johannesburg and into a remote area. Mandela could not get to the courts, and his clients could not get to him. Unable to practice under these conditions, Mandela and his partner had to close their practice.

Blocked in his efforts at peaceful reform and appalled by the government’s wanton demolition of an all-Black Johannesburg suburb, Mandela took up the path of armed resistance. This was the beginning of an armed struggle that went on for over thirty years, taking tens of thousands of lives. Mandela spent twenty-seven of those years in prison, much of it in solitary confinement.

It is no accident that a smart and determined leader would seek justice under the law. And it is no surprise that after being thwarted at every turn, he sought that justice through other means.

After years as an organizer I went to law school to help get justice in this country. I was confident that unlike South Africa, I lived in a country with a rich history of democratic feistiness and a strong commitment to fair enforcement of the laws. I now wonder if I was wrong.

In the United States we are witnessing an unprecedented attack on legal rights. One courthouse door after another is slammed – on workers, on women, on people of color, and even on everyday consumers. Instead of club-swinging southern sheriffs or snarling lynch mobs, the new weapon of choice is a judicially enforced, secret system of private judging called arbitration. Arbitration strips away Americans’ constitutional right to a jury trial and drops them into the murky world of closed-door judging. It’s a rigged game where one side hires, fires, and pays for the referees. Arbitrators at one top private judging firm ruled for employers and against employees, for big business and against consumers 93.8% of the time. And these decisions are made in secret, instead of an open courtroom.

Time after time the U.S. Supreme Court has twisted federal law to strip away these constitutional rights. It Walmart v Dukes it ruled that over a million women working at Walmart could not band together to sue for sex discrimination that stole wages from them. Rights to equal pay, a safe workplace, and equal treatment have been stripped away by secret tribunals. Now that same Supreme Court, in ATT Mobility v Concepcion, has also ruled that fine print language buried in 30-page user agreements can be used to keep millions consumers from banding together in class action suits or workers from demanding that they be repaid for meal and break time stolen from them.

As we honor Mandela, it bears remembering that his broad vision for his country, and his skills as an orator bring to mind an American leader with those same traits, John Fitzgerald Kennedy. President Kennedy may have had Mandela in mind when he prophetically warned that “those who make peaceful change impossible make violent revolution inevitable.”

The engineers of current attacks on access to justice in America would do well to reflect on JFK’s cautionary words, and on the fiery trajectory of Nelson Mandela. If the life of the man being honored this week proves anything, it proves that without justice, restoring security for America’s working people will require a lot more than lawsuits.

About Mark Kleiman

A long-time human rights and consumer activist, Mark has filed cases that have led to over $500 million being recovered for U.S. taxpayers. He has won multimillion dollar verdicts in consumer fraud and medical malpractice trials.

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Getting a job should not require giving up an important constitutional right 1

Sep

2013

By Nicolas Orihuela

Imagine if a private individual, paid by the wealthier or well-connected party in a dispute, got to decide if the government had the right to curtail your free speech, or if an employer could terminate you because of your religious beliefs, or if the police had the right to abuse your fellow citizens, would you want this system of justice? Of course not — the deck would be stacked against you at the start.

That’s what happens to employees who are forced to sign an arbitration agreement, which is that buried clause in the employment contract that requires all employment disputes to be resolved through arbitration as opposed to the traditional civil justice system. In a recent study concerning employment arbitrations before the American Arbitration Association, one of the largest arbitration service providers in the country, the win rate of employees was a meager 21.4% (compared to a win rate of 36.4% in federal court and a win rate of 59% in California state court). That same study revealed that in arbitration employees tend to obtain smaller awards compared to employees who prevail in jury trials. Also, as the paying customer of these arbitrators, employers tend to improve their win rates in arbitration by using the same arbitration service provider multiple times (known as the “repeat player” effect). Under one analysis, the win rate among employees drops from 23.4% to 12.0% when there is a repeat employer-arbitrator pairing.

In today’s world where arbitration agreements are becoming ubiquitous, getting a job now often means signing away your Seventh Amendment right to a jury trial. The founders of our country, who knew this right was vitally important to a democratic republic, wrote it into the original Bill of Rights, along with the right to freedom of speech, the right to bear arms, and the right to an attorney in a criminal case. The Seventh Amendment was no accident. The right to have your peers sit in judgment of your civil case was considered indispensable to a functional democracy and a powerful check on the government and the well-connected.

In the courts, employees are not going down without a fight. Many battle their employers for the right to be heard in civil court. But victory is not assured.. The question of whether the courts will respect the Seventh Amendment or side with employers’ one-sided agreements is still undecided. The question may soon come to a head in the California Supreme Court.

Recently, the California Supreme Court granted review in two cases that exemplify what is wrong with arbitration agreements forced upon employees. In Leos v. Darden Restaurants, Inc., a female employee was subjected to workplace sex harassment. When she filed a complaint in civil court, the employer argued that an arbitration agreement forced upon her at the beginning of her employment required her to submit her claims to arbitration. As is typical of many, it favored the employer, who retained the right to amend or modify the agreement at any time, placed barriers on the employee’s ability to obtain information essential to reveal evidence of wrongdoing, and exempted arbitration claims that only the employer could pursue against the employee. While the Court of Appeal agreed that the arbitration agreement was unfairly forced upon the employee, it still concluded that the employer was entitled to enforce it. If this is not unfair, then what is?

Leos is to be decided together with Baltazar v. Foreover 21, Inc., a sexual and racial harassment case involving a similar forced arbitration agreement: The employee was told, “sign it, or no job.” As in Leos, the agreement covered only claims that an employee is likely to bring (e.g., discrimination claims, wage and hour claims, etc.).

Both Leos and Baltazar represent the typical scenario that employees face on the first day of a new job. These court of appeal rulings represent a troubling trend towards overlooking the real world disparities in power that produce unfair arbitration agreements. While both courts agreed that the agreements were unfairly forced upon the employee, they still held that they were enforceable contracts.

In both cases what is at stake is much larger than contract interpretation and defenses to contract formation. What is at stake is preserving employees’ Seventh Amendment right to a jury trial and preventing the unfair and biased process of forced arbitration.

It’s now up to the California Supreme Court finally to say what is obvious — forced arbitration agreements are an abuse of power that violate employees’ constitutional rights — and to act accordingly, by refusing to enforce them.

About Nicolas Orihuela

Nicolas Orihuela is a founding partner of the employment law firm of Hurwitz, Orihuela & Hayes, LLP and has been practicing since 2002. He represents employees in race discrimination, sex harassment, wrongful termination and disability discrimination related cases. He also handles wage and hour cases.

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Italian Colors decision shows Supreme Court’s true colors on arbitration agreements

Jul

2013

By Anne Richardson

Many people don’t realize that when they start working at a new company the papers they sign often contain agreements to give up their right to go to court if their rights are violated. Too often, it is only when a company has fired that worker, refused to pay her overtime, or subjected her to harassment that a person turns to a lawyer and discovers that the employment dispute will be decided by an arbitrator, not a judge or a jury.

Even if the prospective employee reads and understands that what they are signing requires them to arbitrate, their “agreement” is hardly a voluntary one — most employees are powerless to alter the terms of an employment agreement. For many, the need to pay bills outweighs the concern that someday that employee may have a dispute with the employer.

The downsides of arbitration to employees and consumers are many. Employers and large corporations are more likely to be “repeat players” in arbitration, and it is well known that arbitrators tend over time to become partial to those that employ them regularly. In addition, an arbitrator who does provide a large judgment to an employee is subject to being blackballed by the employers who may refuse to agree to use that arbitrator in the future. According to a 2007 survey conducted by the non-profit Public Citizen, consumers had lost more than 94 percent of cases handled by the debt collection arbitrator National Arbitration Forum. The Supreme Court’s June 20 decision in American Express Co. v. Italian Colors Restaurant continues an aggressive run of cases by this Court that take the side of big business against the little guy. In Italian Colors, owners of a small restaurant tried to challenge an arbitration agreement that was forced upon them by American Express. The restaurant owners claimed that American Express violated federal antitrust laws that affected small businesses as a class, but the arbitration agreement prohibited any class action claims.

Unfortunately, the restaurant’s individual claim was only worth $38,549. The cost of arbitrating the case was estimated to be between $100,000 and $1,000,000. Unless the restaurant could bring a class action, there was no way it could recover its loss. The restaurants argued that the class action prohibition in the arbitration agreement prevented the enforcement of federal antitrust laws.

Justice Scalia, writing for the majority, upheld the class action prohibition in the arbitration agreement. In her sharply worded dissent, Justice Kagan called the decision a “betrayal of our precedents,” wherein “[t]he monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.”

Employee arbitration agreements may still be challenged on grounds that they are unconscionable if the employee was forced to accept the agreement and the terms of the agreement are overly harsh or one-sided in some respect, then the arbitration agreement will not be upheld.

But the Italian Colors case demonstrates that the Federal Arbitration Act, which was passed in 1925, needs to be amended. Congress must respond to the Supreme Court’s extreme interpretation, which threatens to undermine important legislation protecting consumers, employees and other vulnerable citizens.

About Anne Richardson

Anne Richardson is the Associate Director of Public Counsel Opportunity Under Law, a project aimed at eliminating economic injustice on behalf of underrepresented workers, students, and families throughout California and nationwide. Previously she was a partner at Hadsell Stormer Richardson & Renick representing plaintiffs in all varieties of employment discrimination and civil rights matters for over twenty years. A graduate of Stanford Law School, she has been named to the Top 100 Lawyers in Southern California and has received numerous honors for her work.

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Recent Supreme Court ruling on class action waivers in arbitration agreements draws fire

Jun

2013

Today, the Supreme Court (as Justice Elena Kagan’s dissent explains) held as follows, with respect to the fact that arbitration agreements with class action waivers effectively deprive victims of all legal recourse: “Too darn bad.”

Today, the Supreme Court (as Justice Elena Kagan’s dissent explains) held as follows, with respect to the fact that arbitration agreements with class action waivers effectively deprive victims of all legal recourse: “Too darn bad.”

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About Jean Hyams

Jean K. Hyams is a founding partner of Levy Vinick Burrell Hyams LLP, a Bay Area boutique law firm focused on representing employees in employment disputes. She left a career as a manager in high-tech companies to pursue her dream of becoming a civil rights lawyer. She has been named by Northern California Super Lawyers as one of the Top 50 Women Lawyers in Northern California for the past five years and her firm has been rated one of the Best Law Firms (Tier 1 – Employment Law) by U.S. News and World Report. After almost a quarter-century in practice, she now also serves as a court-appointed and private mediator of employment disputes. Jean is Co-Chair of the CELA VOICE.

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