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Mandatory arbitration provisions aren’t always valid

It’s become increasingly common for employers to try to protect themselves from lawsuits by having employees sign mandatory arbitration agreements. Under these agreements, employees waive the right to sue in court for employment-related disputes. Instead, they agree to bring their case before a neutral, private third party.

These agreements are often valid…but not always. Here are some recent examples where courts rejected them and allowed employees to sue anyway:

  • An arbitration agreement that prohibited employees from bringing class actions, and instead required them to arbitrate all claims individually, violated federal labor law, the National Labor Relations Board ruled. The agreement in this case was illegal because it prohibited workers from engaging in “concerted activity” protected by the National Labor Relations Act.
  • Where an arbitration agreement said that it could be modified at any time by the employer…but not by the employee…this made it an unfair and invalid contract, according to a federal appeals court in New Orleans. The employee gave up something, but the employer didn’t give up anything since it could always simply change its mind. The court therefore ignored the agreement and allowed a health club employee to sue in court for unpaid overtime.
  • Where an employer “strategically” waited to bring up a mandatory arbitration agreement until three days before a nurse was scheduled to go to trial for disability discrimination, this was an unfair lawsuit tactic, and the nurse should be allowed to go to trial anyway, a New Jersey appeals court ruled.
  • Where another nurse signed an employment agreement that said she was covered by a “dispute resolution policy,” and an arbitration clause was included in this policy, that wasn’t good enough, a federal appeals court in Cincinnati decided. The agreement the nurse signed had to include the arbitration clause itself – the clause couldn’t simply be hidden away in a separate document that the employment agreement said she should consult “for details.”
  • Finally, a bartender on a cruise ship who sued her employer after she was allegedly raped by her co-workers didn’t have to go to arbitration, a federal appeals court in Atlanta ruled. While the bartender had signed an arbitration agreement, it only covered employment disputes – not a lawsuit for a physical assault.
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