The Rise of Arbitration Clauses in Job Applications and Employment Agreements

Under the Federal Arbitration Act, courts can enforce employment agreements for an employee to arbitrate all disputes, including arbitrating employment discrimination claims.  A case in Boston, where a job applicant, who was 8-months pregnant, highlights the ambiguity of the arbitration clause as to whether or not it only applies to employees.Source:

Paul Mollica, counsel for Outten and Golden, LLP in Chicago says that in this particular case, the employer chose to put that term in a job application, which the applicant had to check off before her interview.  The question is whether this term applied to a claim that she was not hired because she was pregnant and was asked about her pregnancy during her interview and she ultimately did not get the job.

The agreement itself applied to all employment and pre-employment disputes and the applicant said that the clause didn't apply to her situation because she never became an employee to begin with.  The employer argued that the term had applied to employement and any other claims related to the applicant's efforts to obtain employment.  Mollica says the question is - how does the court interpret the claim?  They can broadly interpret it by including any claim related to employment or they can can interpret it more narrowly.

This was the issue held in the 1st Circuit of Boston and the court was split 2-1.  It held that the agreement would be construed narrowly in this case because both sides agreed that Maine state law applied to the contrary and Maine law gives a narrow interpretation to contracts of adhesion, or form contracts that parties don't argue over.  It is a take it or leave it contract.  Under Maine state law, the contract should be construed narrowly against the company that drafted it.  The court read the terms of this contract and said it applied to employment and pre-employment that couldn't include applicants because they were never employed.  The woman did not have to arbitrate her claims against her employer.  Mollica says that when there's ambiguity in a contract, it is up to the courts to decide how narrowly they will interpret it.  Had the employer drafted the contract differently, there might have been a different outcome, he adds.

Mollica says that employers are increasingly demanding that their employers agree before there's any sort of dispute, that if there are any future disputes, you're not going to bring a case to court and not have the normal rights under the law.  Rather, you're agreeing to submit your claim to a private judge and a private process governed by a separate set of rule with no appeals or jury.  A very challenging deal, Mollica feels it seems grossly unfair because the employer has all the leverage.  If you don't want to accept the terms, they don't have to hire or terminate you.  He says that more and more employers are putting this in employment manuals and job applications.

According to Mollica, it is a one-sided affair that employees are bound by these agreements and may not be aware that they have done so.  Sometimes it is a check off box on an email or just one more box that is checked off on a job application but this is something that is taking place "in the shadows of employment interviews and employment relationships."

Paul Mollica is counsel for Outten and Golden LLP, a law firm focusing on employment law.  For more information on Paul Mollica, click here.  Paul's commentary was hosted by The Employment Law Channel, part of The Legal Broadcast Network.