Arbitrate. Or Else! The First in Levine-Piro Law’s Series on Employment Agreements

You’ve just started work at a big-box employer. It’s your first day and you’re given a stack of papers to read through and sign. Chances are you will skip right to the signature page. Don’t do it! It might not be the most scintillating thing you’ll ever read, but take the time to read it before you sign.

Over the next few weeks, we’ll focus on a few of the common provisions in employment agreements, starting today with arbitration clauses, which have been in the news recently.

A few weeks ago, it was revealed that Guitar Center, the largest chain of musical instrument retailers in the world with revenue of over $2 billion, was essentially forcing all of its employees to sign a consent to arbitration mid-employment. If employees declined to sign the arbitration clause, they would be terminated.

By signing an arbitration agreement, an employee basically signs away her ability to go to court over issues that come up in connection with her employment, whether it be wage violations, discrimination, or wrongful termination. Instead, those disputes are heard by an arbitrator, who is supposed to be impartial, like a judge. In actuality, many of the big corporations who use arbitration clauses are able to hand-pick the arbitrators that preside over their disputes, thereby all but ensuring the case will be decided in their favor.

It’s one thing to be presented with an employment agreement containing an arbitration provision at the outset of your employment. At that point, you have a choice whether to sign. You could even try to negotiate it. But to be presented with an arbitration agreement mid-employment and told you will be terminated if you decline to sign it? It doesn’t take a legal genius to see that this might not hold up in court. There is a good argument that an arbitration agreement signed mid-employment under threat of termination was signed under duress, thereby invalidating the agreement. In addition to being potentially unlawful, it’s also downright shady.

The moral of this story, if you ask me, is the importance of small business. At Levine-Piro Law, we routinely advise small businesses in all stages of growth. While we would always advise a small business to use an employment agreement no matter how many employees they have, we would also advise them to be flexible if a particular employee has a concern about one of the provisions in the proposed agreement.

If you are looking for a job, you have a lot of things to consider. Employment with a large national corporation comes with lots of perks, but there are drawbacks, too. You will have no bargaining power when you start in terms of the employment agreement you are asked to sign. You will have to sign it. Your only choice, if you don’t like what you read, is to walk away. If you seek employment with a small business instead, you may have the possibility of negotiating some of the provisions we are going to tell you about over the next few weeks.