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What is an Arbitration Clause in Your Employment Contract?

It is increasingly common for employers to put arbitration clauses in their employees’ contracts. Unfortunately, many employees sign these contracts without understanding what they mean, unintentionally trapping themselves in a potentially troublesome legal arrangement. So what is an arbitration clause, and how can it affect you when it is in your employment contract?


What is an Arbitration Clause?

In simple terms, an arbitration clause is a section in a contract that binds both parties to the agreement (in this case, the employer and employee) to mandatory arbitration. This means that if there is a dispute between the parties, they will not go to court. Instead, they will settle their dispute with a private arbitrator, who will hear the dispute in the place of a judge, and issue a ruling based on his or her understanding of the facts and the law.

Why Do Employers Put Arbitration Clauses in Employment Contracts?

As Steven Sack says in his book, Fired!, “To obtain an arbitration, the law requires the employee and the employer to agree to the arbitration process beforehand in writing to prevent claims of unfairness by the losing side.” By placing an arbitration clause in an employee’s contract, they establish a pre-written agreement between the employer and employee that they agree to have their issues heard in private arbitration. It also effectively makes agreeing to private arbitration a condition of employment, so an employee must choose between agreeing to arbitration and not having a job.

How Does This Affect Employees?

When employees are driven into private arbitration, they are often forced into a setting that heavily favors an employer. Unlike judges, arbitrators are paid by the parties, and they may show favoritism to the party that pays them (which is usually the employer) over the party that does not. Worse still, the judgments of arbitrators are legally binding, and can be extremely difficult to overturn via the courts, except in cases of severe error or bias.

What Can You Do?

If you are in a dispute with your employer and you have an arbitration clause in your employment contract, it can be difficult to deal with it. However, you may have legal options available to you, depending on the exact terms of your contract. That is why you should speak to a lawyer with experience handling employment law claims, who can advise you on your rights and help you to create a strategy that best suits your needs.

If you have gotten into a legal dispute with your employer, it is important that you seek the guidance of an experienced New York employment lawyer who can protect your legal rights and advocate on your behalf. Steven Mitchell Sack, the Employee’s Lawyer, is a New York employment lawyer with more than 41 years’ experience handling the many aspects of employment law. To schedule an appointment with New York City employment lawyer Steven Mitchell Sack, call (917) 371-8000 or visit his contact page.

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