Companies are sued in court despite arbitration agreements

Arbitration agreements – in which workers and employers agree that any job disputes will be decided out of court by a neutral third party – are increasingly being used by businesses that want a quicker and more private way to resolve disputes.

But any such agreement needs to be worded and presented very carefully. Many businesses are finding that their agreements don’t protect them nearly as well as they thought.

For instance, a woman in Maine who was visibly pregnant during a job interview sued a prospective employer for pregnancy discrimination after she was turned down for a job.

The company said the case should go to arbitration, as required in its online job application.

But a federal appeals court decided that the arbitration requirement was unenforceable because it didn’t clearly say that it applied to unsuccessful job applicants, as well as to people who were actually hired for a job.

The arbitration agreement referred only to “your employment,” “the employment process,” and “pre-employment disputes.” Therefore, the court said, it applied only to people who were actually hired.

In another case in California, a court rejected an arbitration requirement because it was “buried” in an employment handbook, and it wasn’t clear that the employee had ever actually read it or agreed to it.

The arbitration provision appeared on pages 36 and 37 of a lengthy employee manual that had been distributed to employees several years before the dispute arose.

The court said that for the provision to be enforceable, it would have to be more than a small piece of “boilerplate” tucked into a detailed handbook that the employee had signed off on as a whole.