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Bryan E. Kuhn
Counselor at Law, P.C.
Business & Employment Law Attorney

Beware of that arbitration clause in your employment contract!

Most contracts include specific terms in them that parties must agree to do business with one another. Employment agreements often contain the same language. Workers often find themselves shocked to learn that they must first pursue arbitration to resolve their differences with their employer when a dispute arises — but that kind of clause may be hidden in their employment contracts.

What is forced arbitration?

Arbitration is a type of alternative dispute resolution (ADR). Parties with the upper hand in a contractual agreement, such as an employer, often include arbitration agreements in their contracts as the first course of action their employee must take before pursuing litigation. A specially-trained lawyer or retired judge, known as an arbitrator, presides over these proceedings. All parties involved in arbitration can present their case in front of the non-biased arbitrator rendering a legally-binding decision in their case.

Why do employers favor forced arbitration clauses?

Many employers require their employees to first pursue arbitration to keep their business private. Arbitrated discussions don’t happen in an open courtroom. It’s easier for companies to keep settlements confidential because of this. Any decision the parties reach is generally legally-binding, as well.

That’s not the only reason that employers favor arbitration clauses, however. There are often different evidentiary rules, burdens of proof, statutes of limitations and due process standards that apply in ADR cases. You put your fate in the hands of a single arbitrator and waive your future rights to have a jury or appellate judge consider your case when you agree to a forced arbitration agreement — and your employer may have reserved the right to pick that arbitrator for themselves.

Data published by the Economic Policy Institute (EPI) in 2015 showed that employees only win in 19.1% of mandatory arbitration cases. In contrast, they succeed in 57% of state-litigated and 36.4% of federal-litigated ones. The mean damages that employees win in arbitrated cases are $23,548 versus $328,008 in state-litigated and $143,497 federally-litigated ones. 

When you’re forced into arbitration with an employer, should you get help?

Given these statistics, it’s no wonder Denver employers are quick to place arbitration agreements in their employment contacts. While you don’t need to have an attorney represent you at a Colorado arbitration, you may find it helpful to have an attorney advocate for you when you need it most. They can also help you understand any other legal options you may have.

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Bryan E. Kuhn, Counselor at Law, P.C.
1660 Lincoln Street Suite 2330
Denver, CO 80264

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