It is important to remember that state contract law governs whether an arbitration agreement is enforceable. Although arbitration agreements are generally in good standing, the specific contractual laws of a State may render a particular arbitration agreement unenforceable based on the facts of that case or contract. A good example of how this works is the issue of consideration in contract law. An important concept in contract law is that a valid contract must be based on an appropriate “consideration”. This means that for a contract to be enforceable, the utility of the contract must be negotiated, in other words, each party receives something of value in exchange for something else of value. In arbitration, you give the employer an advantage by agreeing to settle future claims, and so you should receive something of value in return. For example, if an arbitration agreement is signed as part of the original employment contract, your employment may be a valid consideration – you waive your rights to a possible legal action in exchange for a job. However, what constitutes a valid consideration in the context of employment varies from state to state. For example, in Baker v. Bristol Care, Inc., the Missouri Supreme Court ruled that an arbitration agreement could not be considered if the agreement was based on maintaining employment (after the employee had already been hired). Thus, the Missouri court held that the employee`s continued employment was not valuable enough to be consideration for the benefit obtained by the employer (the arbitration agreement) – therefore, the agreement was unenforceable for lack of consideration. The courts of another State could reach a different conclusion on the basis of the same facts on the basis of the contract law of that State.
In arbitration, a trained, professional and neutral arbitrator acts as a judge who makes a decision to end your dispute. Arbitrators are often retired judges, but that doesn`t mean they follow traditional legal procedures to the letter. Arbitration is actually a very flexible process whose ground rules are open to negotiation (for more information on the differences between arbitration and mediation, can you also find it undecided about your dispute resolution procedure? Combine mediation and arbitration with Med-Arb). Prior to arbitration, the employer and employee (collectively, the “Parties”) select an arbitrator to hear their dispute. Once the arbitrator is chosen, the parties work with the arbitrator to set a date for the “hearing” of their case. In the event that the employer and employee are unable to resolve their dispute and both wish to bring a claim against the other party, the employer and employee agree to have the dispute resolved by final and binding arbitration. The employee and employer agree that the arbitration will take place in the county and state where the employee currently works for the employer or last worked for the employer.  Overall, the questions that the courts will ask about an arbitration agreement fall into two categories: lack of substantive scruples and procedural scruples. Each of them will be discussed in more detail below. It is unlikely that an agreement will be terminated unless a court finds that it is unscrupulous both in substance and procedural terms. However, FAR 22.2006 does not apply (1) to workers covered by a collective agreement negotiated between the contractor and a work organisation [trade union] representing the workers; or (2) employees or independent contractors who entered into a valid arbitration agreement before the Contractor bids for a contract that contains this clause[.] In addition, this exception does not apply to: (i) if the Contractor is authorized to change the terms of the contract with the employee or independent Contractor; or (ii) if the contract with the employee or independent contractor is renegotiated or replaced.
What can be learned from this decision is that the California Supreme Court continues to support binding arbitration of labor disputes, whether based on contract or tort (discrimination, harassment, and other non-contractual violations). However, for the arbitration agreement to be enforceable, the agreed procedure must be fair and impartial and must not “shock” the conscience of the reviewing court because of its significant limitations and procedural obstacles. The agreement must continue to give workers the opportunity to defend their rights in a fair and impartial forum. That`s right. Most U.S. employers expect new workers to sign binding arbitration agreements before they start working or even in the middle of employment. .