Keeping the Arbitration Clause Applicable: Avoiding Unconscionability

It's long been a humorous observation that Americans are litigation-happy, but in many ways, it's based in truth: When Americans feel they have been treated poorly, they often seek redress in the courts. No group on the country knows this more keenly than employers, who have, in recent years, sought to stem the tide of employment-related litigation with the inclusion of binding arbitration agreements in employee contracts.

The key to these arbitration clauses, however, is making them applicable when the time comes: Few employees dispute these clauses at the moment they accept employment, but many seek to invalidate them when they want to file a suit. It's a turbulent time in the law when it comes to the relatively novel use of these arbitration clauses, and nothing seems settled - but the single biggest threat to your arbitration clause is the test of unconscionability.

Unconscionable Agreement

An arbitration clause - or any contractual agreement - can be found to be unconscionable by a court if at the time of the agreement one of the parties is found to have had no reasonable choice in the matter, with the agreement granting the other party an unreasonable advantage. You'll note that none of these terms is very precise. In practice, there are two ways your arbitration clause can be found to be unconscionable: If, at the time of negotiations, the employee could have been considered oppressed and without any reasonable power to negotiate, and if the actual wording of the clause is so one-sided that regardless of the negotiation process, its terms "shock the conscience."

Avoiding Unconscionability

In order to ensure that your binding arbitration agreements will withstand employee challenges, you must ensure they adhere to the following five minimum points:

• Provide for True Neutrals. Your agreement must allow for a true, certified neutral to act as arbitrator.
• Effective Discovery. You cannot seek to limit the discovery the employee has a right to pursue.
• Written Award. The award must be granted in writing.
• Full Relief. You cannot seek to limit the relief that the employee would otherwise find in the courts.
• Fees. Employee cannot be required to pay unreasonable fees that might deter them from seeking arbitration.

These basics will at least ensure the fundamentals of your arbitration agreements are sound and strengthen them against challenges in the courts - although the specific details of your arbitration language might still be challenged.

Do you need any legal assistance regarding labor, management, or employment disputes? Instead of going through the courts, why not let a mediator or arbitrator help you resolve the matter. The Claude D. Ames Law Offices strives to make workplaces in Oakland, California fairer work environments. Please call (510) 652-1300 or visit his website:

This article was published on 03 Oct 2014 and has been viewed 774 times
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