Yes, Have Your Independent Contractors (or Employees) Sign an Agreement to Arbitrate Disputes and Waive Their Rights to Class Action Suits
By Nancy E. Joerg, Esq., Managing Shareholder – St. Charles Office of Wessels Sherman Joerg Liszka Laverty Seneczko P.C.
Clients are increasingly aware of the growing number of class action lawsuits across the United States. What should the worried company owner do? The logical response is to have independent contractors (or employees) sign a contract under which they agree to mandatory arbitration of all disputes, claims or causes of action arising out of or related to the independent contractor (or employment) relationship with the Company.
CLASS ACTION WAIVER INCLUDED IN ARBITRATION AGREEMENT
When an independent contractor or employee signs a mandatory Arbitration Agreement which also contains a “class action waiver,” they also (by signing the Agreement) give up their constitutional right to have a trial by jury. They are giving up their right to go to court in order to settle disputes or to participate in a class action lawsuit.
CAN BE STAND-ALONE DOCUMENT OR INCLUDED IN THE INDEPENDENT CONTRACTOR/EMPLOYMENT AGREEMENT
Mandatory Arbitration Agreements with Class Action Waivers can be a separate stand- alone document in addition to independent contractor agreements/employment agreements. Or, these mandatory Arbitration Agreements with Class Action Waivers can be additional provisions in an independent contractor agreement or employment agreement.
There is a school of thought that it is better to have the mandatory Arbitration Agreement with Class Action Waiver be a stand-alone document separate and apart from the independent contractor agreement or the employment agreement (so that if the independent contractor agreement or employment agreement is found invalid for some reason, the mandatory Arbitration Agreement with Class Action Waiver might still be found to be legally enforceable).
SMART WAY FOR COMPANY TO ATTEMPT LEGAL PROTECTION IN VIEW OF CLASS ACTION LITIGATION
Certain mandatory Arbitration Agreements may eventually be found unenforceable in a court of law, but it is often a good idea to have independent contractors/employees sign such an Arbitration Agreement with Class Action Waiver with the “hope” that it will indeed be enforceable. Just like a non-compete agreement, such contracts are drafted with “fingers crossed” that they will be someday enforceable or at least serve as a strong deterrent.
Once a client decides that they do indeed want such an agreement, there are many decisions to be made as to the specifics of the provisions in the agreement. A mandatory Arbitration Agreement with Class Action Waiver is certainly a smart way for a company to attempt legal protection in the face of a growing ocean of litigation (with often the most painful and expensive part being class action litigation). Companies using independent contractors should seriously consider an immediate revision of their independent contractor agreements to incorporate Arbitration and Class Action Waiver provisions into the independent contractor agreement.
If any readers want to discuss any aspect of the increasing trend to have mandatory Arbitration Agreements with Class Action Waivers, please contact Attorney Nancy E. Joerg at Wessels Sherman's St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.
