Arbitration won’t work on wage claims if agreements are too one-sided

Lots of employers like to use arbitration to settle employment disputes. There are many reasons, including the relatively private setting away from media scrutiny, faster resolution and less chance of a runaway jury award.

But if you structure an arbitration agreement so it takes away too many employee rights, you may find yourself in federal court anyway—first to litigate the validity of the agreement and then to try the case.

That’s why it is essential to get expert help in drafting an agreement that complies with federal and Texas state laws.

Recent case: Jose worked as a welder for a company that services drilling rig manufacturers. The employer did not pay welders overtime for hours worked in excess of 40 in any workweek. It also had Jose and others sign what it referred to as independent contractor agreements that included arbitration agreements. Those agreements required parties to pay their own attorneys’ fees and share the cost of arbitration

Jose sued, alleging wage-and-hour violations, and sought to get the agreement tossed out. He argued it was unconscionable under Texas and federal law. He contended that because the agreement didn’t allow for automatic attorneys’ fees in the event he won his claim, it unconscionably removed a nonwaivable right under the Fair Labor Standards Act. The court agreed and refused to send the case to arbitration. (Andrio v. Kennedy Rig Services, SD TX, 2017)

Final note: A poorly drafted arbitration agreement can prove more expensive than no agreement.