The Red Guide to Temp Agencies

Tips for Temps: Mandatory Arbitration Agreements

Angus B. Grieve-Smith

Back in 1997 I wrote an article about mandatory arbitration agreements. I had just discovered them when I registered with Robert Half's consulting division. I was asked to sign a contract that contained a clause something like this:

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

I was suspicious of this clause, and after doing some research I discovered that I was right to be. Arbitration clauses are becoming increasingly common. And they're not just for employment either: some cell phone companies, car dealers and nursing homes require them. Supporters say that this is because they allow for simple, speedy resolution of conflicts.

But you'll notice that this push for arbitration comes entirely from employers and stores. Have you ever heard of an employee or a consumer saying "I want an arbitration clause in this contract, dammit!"? You have to wonder if these arbitrations don't tilt the scales in favor of the employer. And sure enough, if you look on the web, you'll find:

Arbitrations avoid jury trials - which are often more sympathetic to employees
Arbitrations are often secret - which means there's no way to bring public opinion pressure against the employer
Arbitrations are often cheaper than court cases - for an employer that hires a lawyer. However, sometimes arbitrations require minimum fees that are significantly higher than what a court case would cost an employee who represents him or herself
Arbitrations usually preclude class-action lawsuits - i.e. lawsuits by a number of employees against an employer
The ultimate flaw in the arbitration process is that arbitrators compete for business, and employers are more likely to be repeat customers than employees. There is a significant potential for conflict of interest here, in that arbitrators may tend to rule in favor of a large employer in order to keep their names in that employer's contracts.

Arbitration can be good sometimes. You have a dispute with your employer, why not try arbitration? What is not so good is when it's required by a contract (mandatory arbitration).

Much worse is binding arbitration, where you are forced to abide by the arbitrator's decision. You'll notice that the clause above says that "judgment on the award [...] may be entered in any court [...]." If there's nothing like that in your contract, then the arbitrator's decision is final. The only exceptions are if you have proof that the arbitrator commited fraud, or if you can get a government agency like the federal Equal Employment Opportunity Commission (which didn't sign the agreement) to sue on your behalf.

Another thing to consider is the arbitration procedure specified in the clause. You'll notice that the Robert Half contract refers to the Commercial Arbitration Rules of the American Arbitration Association. If you read the Commercial Arbitration Rules, they're designed for conflicts between two commercial entities, especially large corporations. As such, the minimum filing fee is $500, which is pretty steep if you're trying to get $300 back pay from your employer. Because of this kind of abuse of the arbitration procedure, the AAA has put together special National Rules for the Resolution of Employment Disputes, which cap the filing fee for employees at $125.

So how did my story end? I wound up not pursuing work with Robert Half, and by asking nicely I got another consulting firm, Phoenix Communications (now owned by Headway) to let me cross out the arbitration clause in their contract. But then I wound up living in Albuquerque for two years, where the biggest consulting firm was none other than Robert Half. I bit the bullet and signed the contract, and got fairly steady part-time consulting work from them. After that I spent a year in eastern North Carolina, where temp agencies think nothing of asking temps to take a drug test for the safest, most routine work. I was glad to move back to New York!

Here are my recommendations for a temp who's faced with a mandatory arbitration agreement:

If you're not feeling desparate, you can ask the agency to cross out the arbitration clause, or you'll go elsewhere. A competitive market is your friend, and as I'm writing this in 2004, I don't see any reason why any temp in the New York area should agree to one of these things.
If the clause specifies binding arbitration with no appeal, try and get it changed to non-binding arbitration that can be reviewed by a court.
Get a copy of the arbitration rules specified by the clause. Find out how much you'd have to pay in fees for a typical claim. If the rules are worse than the AAA's National Rules for the Resolution of Employment Disputes, try to change the clause to use those rules.
Complain to the AAA or the EEOC.

In any case, you should write your representatives in Congress and ask them to support the Preservation of Civil Rights Protections Act. It died in the Subcommittee on Employer-Employee Relations in 2001, but it could be revived if it got enough support. Several New York area representatives sit on that subcommittee. You can read more about it at the website of its House sponsor, Congressman Kucinich.

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The Red Guide to Temp Agencies is copyright 1994-2004 by Angus B. Grieve-Smith.
It may be reproduced in its entirety, but may not be sold for profit or reproduced in part without written permission of the Editor.

Feel free to email me with questions or comments. Please do NOT email me your resume. I am not an employer, and I cannot get you a job. If you send me your resume anyway, I will report it to your internet provider. My email address is grvsmth@panix.com.