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Arbitration Clauses in Contracts

All of that small print in those contracts you never quite read, but “accept” with a click has meaning — more meaning than you might expect. A 2011 Supreme Court decision blocked a consumer class action case against AT&T because the plain language of the never-read contract for mobile phone services had two provisions:

  • Any disputes be raised exclusively through the informal mechanism of arbitration, not litigation
  • Claims can only be brought one by one

Justice Scalia, writing for the five-justice majority, upheld the Federal Arbitration Act, which favors arbitration over litigation and rejected claims that inclusion of this limited remedy in contracts is inherently unfair to consumers.

The claim in the AT&T case was a $30 charge for a supposed free cell phone.  As a class action, that $30 charge would multiply and provide an incentive to corporations to play fair with customers. However, although arbitration is free, how many consumers will take the time to use the procedure to recover $30?

Now AT&T Mobility LLC v. Concepcion has stopped a former managing director from proceeding with her gender discrimination suit against Goldman Sachs. On March 21, a federal court ruled that the arbitration clause in Lisa Parisi’s

employment contract prevented her from proceeding with her Title VII litigation.  According to her employment contract, the way to resolve allegations that the culture of Goldman Sachs was testosterone-charged is arbitration. These allegations included that women at Goldman Sachs were:

  • Passed over for promotions and bonuses
  • Excluded from company social events
  • Subjected to a hostile work environment of sexual banter, hits and even assaults

This decision, celebrated on Wall Street, makes the content of employment contracts more important than ever. Consult with attorneys who know the ins and outs of employment law to protect your rights in the workplace before you sign your contract.

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