ACLU among groups calling on arbitrators to stop enforcing 'stay or pay' contracts
More than a dozen civil rights groups are urging the American Arbitration Association to stop the enforcement of “stay or pay” contracts. (Image from Shutterstock)
More than a dozen civil rights groups are urging the American Arbitration Association to stop the enforcement of “stay or pay” contracts.
In a Jan. 13 letter, the ACLU and 12 other organizations said they are “alarmed” that the American Arbitration Association administers arbitrations brought by employers that seek to enforce these contracts. Under the agreements, employers can impose steep penalties on workers who leave their jobs, purportedly to recover expenses for training or relocation.
“Such provisions, which have become increasingly common, particularly in low-wage industries, force workers to choose between coerced labor and catastrophic financial harm,” according to the letter.
Stay-or-pay contracts are unlawful under federal and state anti-trafficking protections, minimum wage laws, Section 7 of the National Labor Relation Act and noncompete or unfair competition laws, the civil rights groups said in their letter to the American Arbitration Association. They are “substantively and procedurally unfair” and disproportionately impact women and people of color.
“Despite repeatedly being advised of the increased use of the AAA by employers attempting to enforce these unlawful and unconscionable contract terms, the AAA has continued to administer such arbitrations without adopting any procedures to allow for an administrative agency or court to review the legality of the ‘pay or stay’ provision,” the civil rights groups said.
In a statement provided to the ABA Journal, the American Arbitration Association said it is “committed to administering employment arbitrations fairly and equitably.” It plans to review and respond to the issues raised by the ACLU and the other civil rights groups.
The Asian American Legal Defense and Education Fund, the National Center for Law and Economic Justice, the National Domestic Workers Alliance and the National Institute for Workers’ Rights were among the groups that sent the letter.
They argued that arbitrations brought by employers seeking to enforce stay-or-pay contracts have proceeded without notifying workers. They said this violates the American Arbitration Association’s rules, which say an arbitration can proceed in the absence of any party only after providing the party due notice.
The American Arbitration Association noted in its statement that minimum standards in its employment arbitration rules and mediation procedures and employment due process protocol outline “essential fairness requirements” in arbitrations. A party’s right to representation and access to relevant information are included in those requirements.
“Nonetheless, the protocol does not allow the AAA to rule on substantive legal disputes,” according to its statement. “Courts have consistently held that substantive legal determinations, including whether a dispute is subject to arbitration, are for a court or arbitrator to decide, not the AAA itself.”
The ACLU and the other civil rights groups are requesting that the American Arbitration Association impose a moratorium on arbitrations involving stay-or-pay contracts.
“By continuing to administer these contract terms despite evidence of their legal dubiousness and abusive implementation, the AAA knowingly is allowing itself to be used to facilitate nothing less than indentured servitude,” they said.
Law.com has additional coverage.
