Why Forced Arbitration Contracts Are Terrible for Workers

A former employee of WeWork has filed a lawsuit based on allegations she was wrongfully terminated for alerting coworkers the company might be violating California labor laws. WeWork is a $15 billion San Francisco startup that turns offices into close-knit shared workspaces.

The lawsuit also claims she refused to sign an arbitration contract that would have waived her rights to sue the company. Why did this employee likely refuse to sign the arbitration contract?

Like other tech companies (looking at you, Uber), employees at WeWork were asked to sign arbitration contracts that bar them from pursuing litigation. Arbitration is a private process hidden from the public. Forced arbitration contracts are used by businesses to avoid publicly damaging and expensive lawsuits. These contracts make it difficult to criticize unethical business practices by keeping awful company policies out of the court of public opinion.

In many cases, employees are forced to sign arbitration contracts as a condition of securing or retaining employment.

Are Forced Arbitration Contracts Always Enforceable?

Forced arbitration contracts hide awful company policies behind closed doors so it is impossible for workers to stand up for basic rights. These mandatory arbitration agreements are contracts of adhesion that give employees no bargaining power and take away the ability to file lawsuits.

However, if these companies are also violating state labor laws, it raises the question of whether arbitration contracts are enforceable in the first place. Forced arbitration contracts should not be used as an excuse to treat employees horribly and to hide unethical company policies from public scrutiny.

Why should you keep a close eye on this case? A ruling in favor of this former WeWork employee could be a big step in restoring basic labor rights to workers. There have been other cases in California where judges have thrown out forced arbitration clauses on the grounds they are unenforceable. Future blog updates will cover such cases.

Kesluk, Silverstein, Jacob & Morrison, P.C. is a Los Angeles labor law firm dedicated to helping workers affected by illegal workplace policies.

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