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Can I sue my employer if I signed an arbitration agreement?

On Behalf of | Jun 1, 2018 | Wrongful Termination

Employment law violations are rarely straightforward. For instance, as an “exempt” employee at your company ineligible for overtime pay, what are your rights? What if you don’t want to work that much overtime? Why is your boss making you take paid time off if you leave a few hours early when you don’t get credit for staying late? Regardless of what you signed when you were hired, you can sue your employer for discrimination, right?

Examining overtime pay and mandatory arbitration

In Epic Systems v. Lewis, which was recently decided by the U.S. Supreme Court, the heart of the dispute was overtime pay and the right of employees to band together and bring a class action in court, despite signing arbitration agreements that required claims against the company be individually decided by a private arbitrator. When you sign an employment agreement that includes mandatory arbitration, you forfeit the right to sue your employer in court. As a result, any legal claims that arise in the future are decided in a private forum by an arbitrator instead of a judge. These agreements are typically buried in the fine print signed at hiring or added to employment policies later in time, requiring employees to consent or face termination. The number of companies requiring arbitration have drastically increased since the early 1990’s: from 2% in 1992 to just under 25% by the early 2000’s, increasing to 55% of all non-unionized workers today. The court’s decision made clear that this is legal, but can you also sign away your right to form a class action with other employees? Again, this recent decision suggests that the answer is yes.

What arbitration means for employees

Employees are at a disadvantage in arbitration compared to court proceedings. Employers call all the shots, as they write the arbitration procedures and choose the arbitrator deciding the case. A 2015 study by Cornell University reviewed decisions made by the American Arbitration Association (AAA) over an 11 year period. The study revealed that employees in arbitration are less likely to be successful, and when damages are awarded in their favor, such awards are substantially less than those awarded by courts in similar cases. Importantly, matters decided by arbitration are binding, and not subject to appeal. In other words, you are stuck with the arbitrator’s decision.

Frequently, wage and time violations are filed as a class action lawsuit, which is more efficient than bringing individual cases to decide the same legal question. As litigation is expensive and time consuming, a class action is a powerful vehicle allowing multiple people to have their day in court on issues they wouldn’t bring to a judge on their own.

For example, say your employer cheats you out of $500 in overtime pay. The cost to hire an attorney and sue your employer is greater than your unpaid wages, and most people will not bring the issue to court. But 1500 employees cheated out of $500 each is a different story. Thus, there is strength in numbers, and the ability of workers to band together against an employer is an important one noted by the dissenting Supreme Court judges, who urged Congress to act to protect the nation’s workers. This issue is bound to surface again in the future, but in the meantime, read the fine print in your employment offers.


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