You were excited about getting your new job. In your excitement and haste, your employer had you sign a bunch of documents. You were reluctant to sign the documents because you did not understand them but your employer said you could not commence work until all the documents were signed and notarized. You signed the documents because you were desperate and would have signed almost anything to get that job. Besides, you reason that you can deal with any disputes that may arise with your employer at that time. Right now, all that’s important is getting a paycheck.
Months later, you are unexpectedly and seriously injured on the job. You spend a few weeks in the hospital having several major surgeries. More surgeries are needed in the future. Your hospital bills are more than $250,000 and threaten to bankrupt and ruin your family. You are afraid and consult an attorney. He informs you that there’s hope because your injuries were caused by the negligence of your employer. You breathe a sigh of relief as your attorney files a lawsuit against your employer on your behalf. Opposing counsel informs your attorney however that one of the documents you signed was an Employee’s Benefit Plan that caps your benefits at $100,000 and contains an Arbitration Agreement. What? An arbitration agreement? What is that and when did you sign it?
That scenario is playing itself out much more frequently these days. People are hastily signing documents with corporations without the advice of counsel to receive certain benefits, e.g., employment, membership, house/car ownership, etc. However, when a dispute arises with the corporation and the injured party rushes to court with their lawsuits they discover that the documents they had previously signed were designed by highly trained and skilled lawyers to cleverly shift liability from the corporation to the injured party or a third-party and/or mandate arbitration. The lawyers knew exactly how to stuff the documents with confusing and complex legalese that protects their corporate clients but means nothing to a layperson until an injury occurs and a dispute arises. Then the layperson learns, oftentimes too late, that his demand for justice has been severely limited by that document he unwittingly signed.
Most people have never heard of the term arbitration or do not understand its meaning. Let me briefly explain what the term means. Arbitration is a type of alternative dispute resolution that occurs outside a courtroom where a supposed neutral arbitrator receives evidence from both sides of a dispute and decides the outcome of the dispute between the parties. The decisions of the arbitrator may be binding or nonbinding on the parties and usually cannot be appealed to a judge.
Arbitration has been part of the legal landscape for many years. Ideally, it helps the legal system and society because it affords parties an opportunity to resolve their disputes without a lengthy and expensive court battle. However, in the real world, arbitration agreements have come to unfairly tilt the scales of justice toward corporations, insurance companies, hospitals, and etc. for several reasons.
First, the exorbitant cost of arbitration is usually split between the parties. That alone gives corporations an unfair advantage since most people cannot afford to pay its share of the arbitration fees and may therefore be forced to drop their dispute against the corporation. Obviously, arbitration fees are no problem for a rich corporation.
Second, the avoidance of jury trials is another unfair advantage for corporations since their risks of a large jury verdict is significantly diminished in arbitration. Juries usually do a much better job of making the injured party whole than do arbitrators. That’s why corporations push arbitration so strongly.
Third, some plaintiff attorneys believe many arbitrators are too influenced by large corporations. The corporations have very deep pockets and the arbitrator wants more arbitration referrals from the corporations. The arbitrator knows that his arbitration business will suffer if he develops a reputation of awarding large settlements or rulings against corporations.
Fourth, corporations also have the resources to lobby legislatures to enact arbitration rules and regulations that benefit corporations and/or they contribute to the reelection campaigns of local judges who in turn demand arbitration even in questionable cases. Hence, it is often very difficult for a party to convince a local judge or arbitrator to set aside a signed arbitration agreement in most states even when the person did not read or understand the arbitration agreement.
Just the other day my family and I joined a fitness club. My wife handled all the paperwork. I would not have known what she signed until my son asked me to sign a form so his friend could visit the fitness club as our guest. When I read the form, I was suddenly jolted with the language in the form. Among other things, it required that I defend and indemnify the fitness club in the event that our guest is injured and sues the fitness club. That means I was agreeing to hire an attorney for the fitness club and pay any judgments against the fitness club arising from any such lawsuit. In other words, I was agreeing to assume the role of an insurance company for the fitness club in the event of an accident. Clearly, the agreement was disadvantageous to both me and our guest since suing me could not result in the amount of compensatory damages that could come from the much more deeper pockets of the fitness club or their billion dollar insurance company. I refused to sign the document and told management that anyone who signed the form is foolish.
So, what should you do before signing documents that you do not understand? Consult an experienced attorney. Risk losing the job or other benefit but do not attempt to read and understand the document yourself. Unless you are an attorney, you probably cannot understand the legal import of the terms in the document. An experienced attorney can advise you on the potential ramifications of the document and the peculiarities of arbitration. That way, if you decide to sign the document after speaking to an attorney, you will know upfront your risks and avoid getting the surprise of your life later.
About Augustus Corbett, J.D.