I went to renew my gym membership last week (and not just because it’s the Holidays). I wasn’t surprised when the manager handed me a contract that had an arbitration clause in it. I was surprised when he tried to tell me the clause just means “we want you to come to us first” if you have any dispute with the gym. I’m sure the manager was instructed by the higher-ups to feed me this line. But it was, to put it very mildly, somewhat untrue. And it reminded me why Ohio employees should avoid signing arbitration agreements at work whenever possible.
Many Ohio employers require their employees to sign arbitration agreements. These agreements typically do not give the employees any job security or tangible benefits. Instead, arbitration agreements take away an employee’s right to sue in court for illegal workplace discrimination, retaliation, or harassment, forcing the employee to pursue claims only through a private arbitration. This is true no matter how outrageous the employer’s conduct. Employers love these agreements for several reasons:
- Unlike a trial in a public courthouse, arbitration is private and confidential. So if the employer has broken the employment laws, chances are nobody will find out if the case goes through arbitration.
- There is no right to appeal. In the court system, parties can appeal if they lose at the trial court level. That is typically not the case with arbitration. This tends to favor employers because . . .
- Employees win less often in arbitration than in court, and when they do win, they recover less for the harms done to them. A recent Cornell University study found that employees win only about 21% of the time in arbitration, even including cases where the “win” was a trivial amount. The same study found that when employees do win in arbitration, they recover about five to ten times less than they would in court, a staggering difference.
What explains why employers fare so much better in arbitration? It’s called the “repeat player” effect. Many employers will need an arbitrator multiple times, but virtually no employees will. As a result, there is an incentive for an arbitrator (who is selected and paid by the parties) to reach a decision that will make the company select him or her again—meaning a decision against the employee. Thus, as the “repeat player,” the employer has an edge in arbitration that would not exist with a judge or jury. That isn’t to say arbitrators are overtly biased, but the subtle pressure pushing towards pro-employer decisions is beyond dispute.
For all these reasons, Ohio employees facing employment discrimination, retaliation, or harassment sometimes find themselves wishing they did not sign an arbitration clause. Unfortunately, many companies require employees to sign as a condition of employment, leaving people with the false choice of giving up either their constitutional right to trial or their livelihoods.
Businesses like my gym love arbitration contracts with their consumers for the same reasons Ohio employers love them. My gym had an unusual aspect of its arbitration agreement though: an opt-out clause. I’ll surely be opting out. Most employees forced to sign arbitration agreements aren’t so lucky. But if they have the option, Ohio employees should avoid signing. Eventually, if enough employees resist, employers may stop trying to keep employees from “exercising” their constitutional right to go to court when the employer breaks the law.