No Risk for Companies Writing Unfair Arbitration Agreements
Companies see little downside when they write an unfair arbitration agreement covering employment disputes, a plaintiffs employment lawyer told the Wall Street Journal (sub. req.).
That’s because courts usually strike the offending provisions and enforce the rest of the arbitration agreement, said San Francisco lawyer Cliff Palefsky. “There is little incentive to write arbitration agreements correctly the first time,” he said.
Courts are reluctant to toss mandatory arbitration agreements or to overturn arbitration awards, even as the number of companies requiring arbitration of worker disputes is growing. Alexander Colvin, a labor studies professor at Pennsylvania State University, told the newspaper an estimated 15 percent to 20 percent of businesses now require arbitration, up from less than 10 percent in 1995.
A bill introduced this year in Congress would bar mandatory arbitration of employment and consumer disputes, but the measure doesn’t stand a good chance of passing. In any event, some studies show employees are more likely to win in arbitration and receive about the same amount of compensation. But the data is conflicting; other studies show employees do worse. All agree arbitration is less likely to results in very large awards.
