May It Please The Court

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May It Please The Court
by Leonard Rivkin
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Quote of the Day - If one party resolves to demand what the other resolves to refuse, the dispute can be determined only by arbitration; and between powers who have no common superior, there is no other arbitrator than the sword. - Samuel Johnson
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Court Strikes Down Employment Contract Arbitration Provision

Companies hire lawyers to draft contracts to protect them and the company president or general counsel typically expect the contract to do its job. 

Then why do companies who spend attorneys fees get sued and then lose even when they use the attorney-prepared contract?

Here's why:  no one explained to the line manager how to handle the contract, or things just got too busy and it fell between the cracks. 

Let me give you the setup.  Airborne Express hires an employee and uses its attorney-prepared contract to ensure the employee can never get in front of a jury and instead be forced into arbitration.  Sounds like it should work, right?

Hold on to your britches.  The employee sued for sexual harassment and now will end up in front of a jury and not in arbitration.  Here's the uncontroverted statement from the employee, right out of the Court's opinion in Ontiveros v. DHL Express, which struck down the arbitration provision as unconscionable:

"At no time did [my manager] explain or describe the contents of the documents in that hiring packet.  The hiring packet contained documents like an Immigration Form I-9, documents pertaining to health care coverage, documents relating to my base compensation, documents welcoming me to the company and other documents the content of which I do not recall.  The hiring packet came in a binder file.  At no time did anyone inform me that I was signing an Agreement to Arbitrate Claims or explain what that was or how it affected my substantive rights.  At no time did anyone inform me that I was required to give up any rights I might have to a jury trial in order to work for Airborne.  When I was hired, I was informed that I needed to sign the paperwork in order to get paid and start my new job, and I was not afforded an opportunity [to] negotiate further the terms of my employment.  I was already working long hours at that point in time and did not have any real opportunity to review the documents I was told to sign.  I was not told that I should review the documents with a lawyer or discuss my rights with a lawyer.  The first time I can recall knowing about the Agreement to Arbitrate Claims was when DHL raised this issue in this lawsuit.  I had not been given a copy of the agreement prior to filing this lawsuit."

With that statement, it's not hard to understand why the Court wasn't comfortable with the arbitration provision in the employment contract. 

As an employer, do you have to explain all of this to an employee?  Well ... while I might have answered this question differently before this opinion came out, now I would say yes.  In fact, I would probably recommend that the company send the employment package to the employee with the hire letter, allowing enough time before the start date to casually read everything and consult with a lawyer, if necessary.  Then I'd make the employee go through a long, pre-employment interview in the Human Relations Department and sign innumerable acknowledgements that each and every piece of paper was explained and understood, and afterward, ask if the employee was still interested in accepting the job given all the terms and conditions in the employment contract, and then have the HR staffer sign the contracts on behalf of the company. 

Ugh.  More paperwork.  What will they think of next?

Posted by J. Craig Williams on Saturday, July 05, 2008 at 18:19 Comments (2)


Comments by J. Craig Williams from United States on Wednesday, July 09, 2008 at 02:48 - IP Logged
I think not, Joe. A job is not an entitlement. It''s an opportunity to work in return for a wage and perhaps other benefits. The employer has the right to determine the terms and conditions on which it offers the job to the worker. If the worker doesn''t like those terms and conditions, then the worker can get a job somewhere else, or like the employer, start a company and offer jobs to others.
In an at-will state like California, the "rights" you''re talking about are illusory. There are some limited rights of employees, to be sure, but where is it written that an employer has to have the terms of employment dictated by an employee? I think you''ve got it backwards.

Comments by Joe from United States on Monday, July 07, 2008 at 11:01 - IP Logged
These arbitration agreements, often mandatory by most large corporations, are removing the rights of employees in the first place. Is it really legal to, in essence, for an employee to give up their right to a fair trial in order to get a job? Isn''t that coersion?

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