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How does forced arbitration affect wage theft?

On Behalf of | Sep 3, 2021 | Blog, Wage & Hour Laws

Annual wage theft represents the greatest source of theft compared to all other sources. History-defining bank heists and cybercrime do not come close to how much employers shave off the value of your labor.

This happens through taking a percentage of tips, unpaid overtime, or even forcing you to work through your legally mandated lunch breaks. But employers have another tool that may help so that their wage theft goes unconfronted: forced arbitration.

What is forced arbitration?

Forced arbitration is a clause in many employment contracts that remove your right to take your employer to court, and instead forcing you to enter a process of arbitration to come to an agreement. This, combined with class/collective action waivers, makes confronting a company about their mistreatment an expensive and time-consuming process. The National Employment Law Project estimates over 4.5 million workers choose to never file a claim at all because of the hassle. Reports show this has a part in the $9.2 billion that employers pocketed due to forced arbitration in 2019.

How do you avoid this?

Since employers bake these practices into their employee contracts, this method of wage theft requires some foresight. Before you sign any employee contract, you may want to do your research and lean on other resources to determine whether your prospective employer aims to remove your rights to sue, participate in class action lawsuits or engage in collective bargaining. If they include those clauses, there might be ways to adjust your contract ahead of time.

There are initiatives such as the Forced Arbitration Injustice Repeal Act, which may remove an employer’s ability to put these agreements into your contract. Until legislation like that passes, it is up to you and your fellow workers to stay vigilant and avoid or fight this kind of wage theft.


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