What Is An Arbitration Agreement?
Arbitration agreements are contracts entered into between two or more parties in which those parties agree to submit their disputes to a neutral arbitrator for resolution rather than litigate their case in court. The parties can agree to have only one arbitrator or multiple arbitrators like the verdict panel in an actual trial. The arbitrator makes a finding of liability and damages which is referred to as an arbitration award. An arbitration award is generally final and there are very few rights to appeal or collaterally attack an arbitration award . Once an arbitration award is made, the award may be confirmed and entered as a judgment with the court.
Arbitration is supposed to bring finality to a dispute similar to a verdict at trial. It is used in commercial agreements like loan agreements and equipment leases but it has also been used in consumer based contracts like credit card agreements and cell phone contracts. In the consumer arena, there are some new legislative and case law developments which make an arbitration agreement less effective for a consumer to use in litigation.
The Legal Limitations On Arbitration Agreements
The legal boundaries of arbitration agreements, including circumstances that might render the agreement void or unenforceable, are not always clear. Depending on applicable law, certain corporations and entities are legally barred from agreeing to arbitrate cases. Further, arbitration agreements may be void and unenforceable for other reasons. For example, a contract may be procurred by fraud, duress, mistake, coercion, or undue influence. Further, if parties did not actually have a meeting of the minds, the arbitration agreement may be void. If the individual agreeing to arbitrate does not have the requisite authority to bind the legal entity to an arbitration agreement on the terms offered, it may render the agreement non-binding.
Besides circumstances that might render an arbitration agreement void or unenforceable, each state has its own enforceability and validity requirements. For example, certain statutes and regulations exist requiring a signatory to an arbitration agreement be informed about the right to contract. Others expressly require explanation of the potential consequences of signing. In certain states, such as Ohio, statute also expresses a preference for judicial resolution even where an arbitration agreement would otherwise be enforceable. However, even where an arbitration agreement is void or unenforceable, a court may nonetheless refer the dispute for arbitration. At least one federal circuit court has explained that whether or not a contract is enforceable is a question for the arbitrator, not the court.
Can You Still Go To Court When You’ve Agreed To An Arbitration?
Because arbitration agreements are such a common part of everyday life, they are not always as simple to navigate as you might think. Understanding your rights is extremely important after signing an arbitration agreement, and in some cases, that can even mean continuing with a lawsuit. Here are some ways that you might have grounds to sue despite signing an arbitration agreement.
You may still have a case if you signed the arbitration agreement under duress or fraudulent circumstances. Perhaps there was a threat of violence or other action on the part of the person making you sign the document. If someone made you believe that signing the document was your only option, you may have a case.
Additionally, if you signed the arbitration agreement without reading it or understanding the terms, you may still have a case. In order to uphold the binding decision made during the arbitration process, the parties needed to enter the arbitration agreement voluntarily and without any coercion, threat or undue pressure. If you do not feel that the agreement was entered freely and voluntarily, you may be able to continue your lawsuit in the initial court.
Exceptions That Permit Litigation
Despite the fact that many employment agreements contain binding arbitration clauses, there are specific situations when legal action is allowed. An employee may file a lawsuit for a breach of the arbitration terms. For example, if an arbitration specification requires a financial limitation, and the company engages in discovery that effectively negates the financial limits, the employee would have a valid claim against the company. To add to this example, if the employee is unable to afford an arbitrator , the agreement will be void, as the employee has not been given the opportunity to file a reasonable complaint. If an arbitration agreement is illegal when it comes to contract stipulations, an employee is allowed to file legal action outside of the normally agreed-upon boundaries. An example of this is if an employee is forced into mandatory arbitration for a civil rights violation even though the mandatory labor laws are particularly against such arbitration. In this situation, the employee is allowed to file a lawsuit.
What To Do If You Plan On Suing
If you believe that you have a case and you signed an arbitration agreement, the first step is to consult with an attorney. An attorney can review your arbitration agreement and advise you as to whether you have any rights to sue in court. This will depend on the terms of the agreement and the claims you may have. For example, a waiver of the right to sue in court for all claims may be defeating. However, even where the agreement does not cover the type of claim against which you are seeking relief, the arbitration agreement may cover the cause of action that you are bringing. For example, suppose the arbitration agreement expressly says that it does not cover claims for discrimination, harassment, or retaliation. Nonetheless, the agreement might say that all disputes, including discrimination disputes, arising out of your employment are subject to mandatory, binding arbitration. In addition, the agreement may also say that you must file a complaint with the Equal Employment Opportunity Commission or a state or local agency like the New York City Commission on Human Rights or a state human rights agency. Before filing a charge with the EEOC, in some cases the employer may be entitled to "correct" the alleged unlawful action. Perhaps more significantly, if you walked into with office on Monday, and the manager announced that your position had been eliminated and you were terminated, you might very well have a right to complain of the matter to the EEOC and/or the agency — which would most probably give you a "right to sue" letter. Moreover, an attorney can file the charge for you with the EEOC, or the agencies, and/or file a lawsuit in court on your behalf (after a right to sue letter is issued). In any event, we recommend that you gather a chronology of what occurred immediately prior to your termination and immediately after. Were you informed of your alleged performance issues? Did you have a meeting in which you were confronted with complaints? If so, when did that occur? Do you have copies of any of your performance reviews? Any other documentation from the employer before your termination? The next stage is to notify an attorney of any possible claims you may have, and enlist his or her help.
Conclusion: Options And Seeking Legal Counsel
As is the case with any type of contract, it is important to thoroughly understand your rights and obligations when you sign an agreement to arbitrate employment disputes or are presented with an amendment to an existing employment agreement that contains such a provision. In some situations, you have the ability to negotiate out of an arbitration agreement before you sign it. But, once you’ve signed one, you generally cannot be forced to participate in the arbitration process against your will unless you’ve already initiated a lawsuit or administrative claim . And, once you’ve initiated the lawsuit or administrative claim, you probably will be required to arbitrate your case in order to pursue your legal claims with a small chance that the employer has waived its right to do so.
If you are presented with, or are subject to, an arbitration agreement you should consult with an experienced employment law attorney to determine whether you have an option to negotiate out of the agreement, or, if you’ve been presented with a post-dispute agreement, whether you can get out of participating in the arbitration process based on the circumstances of your situation. While these agreements are generally enforceable, there are limited circumstances in which you may be able to avoid the effects of one.