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Arbitration Agreements Aren’t Having the Desired Effects for Some Companies


We have previously written about the ways that arbitration clauses strip consumers and workers of their rights by requiring that lawsuits be heard before arbitrators instead of before judges and juries. Arbitration also limits a plaintiff’s ability to collect crucial evidence needed to prove a case, and in many instances, arbitration clauses restrict the ability of victims to bring class action lawsuits.

The U.S. Supreme Court recently upheld the use of these arbitration clauses as conditions for employment. Many businesses saw this as a win. By limiting workers’ abilities to file class action lawsuits, and by taking cases away from juries, the logic was that fewer workers with grievances would bother to bring lawsuits at all.

Consumers Using Arbitration to Their Advantage

But that’s not quite how things are working out for Mexican food chain Chipotle, which requires its workers to sign arbitration agreements. When the Supreme Court held that the arbitration clauses were valid, many workers who had been part of a class action lawsuit against the restaurant alleging unpaid wages were eliminated from the class, as their arbitration clause with Chipotle forbade it.

What Chipotle didn’t bargain for was all of these excluded workers bringing their lawsuits individually in arbitration. Chipotle’s logic (along with many other employers who use these clauses) was that these individual workers, excluded from being part of the class action, would just drop their lawsuit altogether, as many of their cases do not involve significant enough damages to make it worth the time and money of bringing an individual lawsuit.

It seems that this logic may have been faulty because the restaurant is now faced with a barrage of individual lawsuits in arbitration that they did not anticipate; ultimately, this could also make the lawsuits more expensive to the company overall. A similar problem is also being dealt with by ride sharing giant Uber, which also requires drivers to sign arbitration agreements.

Expenses for Arbitration May be More Costly Than Class Action Damages

Chipotle apparently didn’t account for the costs of hiring attorneys, paying arbitrators, and having to find representation all over the country (where the individual suits have been brought now that they can no longer be brought together in one place as a class action).

Just the expenses of legal fees in defending the lawsuits and costs to arbitrators are anticipated to cost the chain millions of dollars and may end up being just as costly if not more than it would have cost just to settle the class action lawsuit that existed in the first place.

Attempt to Eliminate Lawyers Fails

As a last ditch effort, the chain then attempted to forbid the individual members’ attorneys from representing them in the arbitration. Chipotle apparently felt the only reason why the individual workers were all pursuing their claims in arbitration was because their attorneys had already done most of the legal legwork when they were all part of the class action.

The attempt to strip the workers of their attorneys was denied, and the judge called the restaurant’s attempts “unseemly.”

Don’t give up your rights as a consumer just because you may have signed an arbitration agreement. Contact the civil litigation lawyers at Jacobs Legal in Miami today to discuss your options.


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