When an employee is hired, in many, if not most instances, he or she is required to sign some form of employment agreement. These contracts outline the duties and expectations of both the employer and the employee. Frequently, Texas employment contracts include an arbitration clause, which is an agreement between the parties that any dispute arising from the employment relationship will be resolved out of the court system by an independent arbitrator.
For the most part, Texas employment arbitration agreements favor the more sophisticated party. For one, the costs of defending a case in arbitration is lower than a traditional Texas employment case in the court system. Additionally, depending on the terms of the arbitration agreement, certain rules of evidence may not apply. Moreover, an arbitrator’s conclusion is generally final and thus not appealable.
Like other contractual agreements, arbitration agreements can be enforceable if they are voluntarily entered into by both parties, are not overly broad in their scope, and do not provide an unfair benefit to one party. Thus, just because an employee signed an employment contract that contains an arbitration clause does not necessarily mean that the clause will be enforceable. At the same time, an arbitration agreement can be enforced even if the employee does not sign the agreement, particularly if they continue to work knowing that there is an arbitration policy.
When an Arbitration Clause Will Be Unenforceable
However, not all arbitration agreements are enforceable. Courts will reject Texas employment arbitration agreements if the agreement is unconscionable. Unconscionability is a contractual defense that is broken down into two parts, procedural unconscionability and substantive unconscionability. Courts require that an employee attempting to avoid the enforcement of an arbitration agreement establish both procedural and substantive unconscionability.
Procedural unconscionability relates to the formation of the contract. Thus, courts generally consider the overall atmosphere in which the contract was signed. This includes the relative bargaining power of the parties and the alternatives presented to the party being asked to sign the agreement. In the context of Texas employment contracts, courts have approved of the use of mandatory arbitration clauses so long as the substance of the contract is fair to both parties.
Substantive unconscionability deals with the terms of the contract. When considering if a contract is substantively unconscionable, courts look to the following:
- Who bears the cost of arbitration;
- The statute of limitations;
- Whether the outcome of the case will be kept secret;
- The availability and scope of discovery; and
- Whether only one side is obligated to arbitrate.
There may be other facts that courts will consider when determining whether an arbitration clause is unconscionable.
Are You Involved in an Employment Dispute?
At Rob Wiley, we represent employees in all types of employment-related claims and are experienced in defending our clients’ right to access and use the court system. If avoiding arbitration is a foregone conclusion, we will zealously advocate on your behalf in front of an arbitrator or arbitration panel. To learn more about how we can help you with the employment issues you are dealing with, call 214-528-6500 today.
More Blog Posts:
Can a Texas Employer Require Employees to Pool Tips?, Dallas Employment Lawyer Blog, October 25, 2018.
Responsibilities of Texas Employers under the Americans with Disabilities Act, Dallas Employment Lawyer Blog, November 2, 2018.