The Dangers of Signing an Employment Arbitration Agreement in North Carolina

On the heels of a San Francisco federal court’s decision on October 4, 2021, Tesla must pay a former worker $137 million for the racist abuse he endured while working for the electric vehicle and clean energy giant, employment contracts and arbitration agreements have become a hot topic throughout the country.

For decades, employers including large companies like Tesla have raised concern over the cost and management disruption caused by employment-related claims and litigation. As a result, many companies have implemented alternative dispute resolution programs, many of which include employment arbitration agreements.

When these agreements are signed by employees, both parties agree to resolve any employment-related dispute through binding arbitration as opposed to a jury trial. This includes disputes regarding hostile work environments that enable discrimination and harassment.

This Tesla case was an exception to the company’s alternative dispute resolution policy only because the employee who was awarded the large sum by the court had not signed one of Tesla’s mandatory arbitration agreements, which the company uses to force employees to resolve disputes without a public trial.

Companies of all sizes are including mandatory arbitration agreements in employment contracts to avoid the fate that Tesla endured in federal court, with the jury awarding the employee $130 million in punitive damages and $6.9 million for emotional distress during his employment as an elevator operator with the company.

What does that mean for our North Carolina workforce? Unfortunately, many employees often sign arbitration agreements unintentionally, as employers continue to bury the clause in other documents, like employment contracts, hiring letters, or employee handbooks.

If you are asked to sign an employment contract before taking a new position or to remain in a current position, here is what you should ask before forfeiting your rights.

Why Do Companies Include Arbitration Agreements in Employment Contracts?

Arbitration agreements were put in place to resolve employment-related disputes expeditiously, privately, and less expensively than litigation, which could lead to a jury verdict much like the one awarded to the former Tesla employee.

From an employer standpoint, once the employee signs the agreement, they waive their right to sue the company for sexual harassment or racial, religious, or any other type of discrimination

When employees are subjected to a hostile work environment, they must resolve the issue through arbitration, which many say insulates the employer from taking full responsibility for the physical or sexual abuse and/or emotional distress employees suffer.

Do Employment Arbitration Agreements Invite Hostility in the Workplace?

Responding to the Tesla jury verdict, Nia Impact Capital a shareholder activist firm in California asked Tesla’s board to study the overall effects of mandatory arbitration agreements, concerned they enable discriminatorily and harassing behavior in the workplace.

In a recent shareholder proposal, Nia Impact Capital wrote: “The use of mandatory arbitration provisions limits employees’ remedies for wrongdoing, precludes employees from suing in court when discrimination and harassment occur, and can keep underlying facts, misconduct or case outcomes secret and thereby prevent employees from learning about and acting on shared concerns.”

Simply put, these agreements do not allow employees to hold their employers accountable for facilitating hostile work environments and leave them with no recourse for alerting shareholders and other employees of the dangers of working there, because mandatory arbitration compels them to resolve disputes behind closed doors rather than in a public trial.

This means that companies like Tesla rarely face significant damages for managing a hostile workplace, nor are they required to take corrective actions after arbitrators settle a dispute.

After arbitration is completed, employees typically walk away with an agreed-upon financial settlement and a non-disclosure agreement that precludes them from discussing the details of their negotiations.

Can I Sue My Employer If I Signed an Arbitration Agreement?

No. Employees cannot sue their employers in court after signing an arbitration agreement.

In short, the employment arbitration agreement states that you agree not to pursue any legal action against your employer in court. Instead, any disputes that you have with your employer must be settled through a process known as arbitration.

Protect Your Rights: Talk to an Attorney Before Signing an Employment Contract or Agreement

It has become commonplace for employers to include mandatory arbitration agreements inside employment forms, documents, contracts, or employee handbooks, which means many employees have no idea they are signing away their rights.

It is important for all employees to thoroughly read every document their employer provides before signing it. If you have questions about the verbiage in these documents, contact an experienced attorney who can provide straightforward answers as to what rights you are forfeiting by signing the agreement.

This will allow you to make informed decisions about your future.

What if I Refuse to Sign an Employment Arbitration Agreement?

Employees have the right to refuse an employment arbitration agreement, but the employer also has the right to rescind the job offer if they do not comply.

Some employers are willing to negotiate with highly sought-after prospects or existing employees who bring more value to the company than an arbitration agreement should jeopardize.

To understand your complete rights before signing any employment contract, or to pursue your North Carolina employer for enabling a hostile work environment, contact our skilled litigation attorneys at Roberts & Harris today at (919) 249-5006.

Our skilled litigators provide free consultations for all employment cases in North Carolina, and never charge any legal fees unless we deliver a positive outcome for your unique case.