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The menace of mandatory arbitration: Arbitration clauses require workers to sign away their rights and take a detour around the courthouse. Although judges have repeatedly upheld these clauses, there are ways to challenge and halt their worst excesses.

Article Excerpt
The Federal Arbitration Act (FAA) has divided plaintiffs employment lawyers into two camps: those who think it means death to the republic, and those who think it merely means death to the civil justice system.

But until there's a congressional amendment--and that's unlikely any time soon--or a significant change in U.S. Supreme Court jurisprudence--a pleasant but wistful thought--plaintiff employment lawyers are going to have to deal with the FAA.

We won't praise the act, and we can't bury it. But by looking at recent decisions about employees not covered by collective bargaining agreements, we can come up with strategies that will increase your chances of securing your clients a day in court. (1)

The use of mandatory arbitration clauses in employment is expanding rapidly. (2) These days a fight over termination at will is as likely to happen in a nearby Holiday Inn meeting room as in the local courthouse.

For this, you can thank [section] 2 of the act, which provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." State law can preclude enforcement of arbitration clauses "if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally." (3) State contract law plays a large role in assessing whether such agreements are enforceable.

Section 1 of the act excludes "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." But in Circuit City Stores, Inc. v. Adams, the Supreme Court made it clear that this exemption is narrow, applying only to "contracts of employment of transportation workers." (4)

One way to defeat mandatory arbitration clauses would be to convince courts to drop their obsessive devotion to enforcing all boilerplate contracts, not just those with arbitration agreements. Professor Paul Carrington of Duke Law School has argued that this blithe enforcement undermines important public values, and that jurisprudence that refuses to enforce controversial terms would better serve the public interest. (5)

In employment cases, enforcing adhesion contracts ensconces in the law a decidedly pre-industrial-revolution vision of "choice" that seems determined to take workers back to the Oliver Twist era. Not that you want to make this argument in court. Until courts come to their collective senses, you're better off trying more nuanced positions.

Unconscionability

The strongest argument you can make is that an agreement is unconscionable. Barron's Law Dictionary defines unconscionability as "so unreasonably detrimental to the interest of a contracting party as to render the contract unenforceable." Courts have asked whether an agreement is so one-sided that it would "shock the conscience" of a reasonable person. (6) The law defining this varies from state to state, but it usually has both procedural and substantive components.

The procedural component considers how the contract was formed, taking into account the relative bargaining power of each party and who wrote the contract. Defendants are quick to point to the Supreme Court's decision in Gilmer v. Interstate/Johnson Lane Corp., which found that "mere inequality in bargaining power ... is not a sufficient reason to hold that arbitration agreements are never enforceable...." (7)

But the Court also noted that Gilmer was an "experienced businessman" who was not saying he had been "coerced" into signing the clause. (8) The very notion of a coerced arbitration agreement is anathema to the Supreme Court's repeated pronouncement that "arbitration under the act is a matter of consent, not coercion." (9) In the context of employment cases, there is a good chance that adhesion...

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