Arbitration Clauses in Contracts: Are They Fair for Workers?
Arbitration clauses are increasingly common in employment contracts, requiring disputes to be resolved through private arbitration instead of the traditional court system. While proponents argue that arbitration is efficient and cost-effective, critics contend that it can be a powerful tool for large corporations to avoid accountability by limiting workers’ rights and access to justice. Charles Adler, et al. v. Gruma Corporation, et al., No. 23-3177 (3d Cir.) provides a real-world example of arbitration clause concerns, highlighting their potential to undermine workers’ rights and shift the balance of power in favor of large corporations.
Case Background
Charles Adler and his son, Grant, ran a distribution route in New Jersey for Gruma Corporation, the world’s largest tortilla manufacturer and owner of popular brands like Mission Foods. While Gruma exerted significant control over their work, the Adlers were denied the protections typically afforded to employees or independent franchisees.
After the Adlers consulted with an attorney regarding their rights, Gruma terminated their distributorship. The Adlers believe this termination was retaliatory. Bleakley Platt & Schmidt partner Stephen J. Brown filed suit against Gruma, alleging violations of several federal and state laws, including the Fair Labor Standards Act and the New Jersey Franchise Practices Act.
Read about Bleakley Platt & Schmidt’s involvement in this case here.
Compelled Arbitration and the Appeal
Arbitration clauses are often included in contracts to keep disputes out of court. Rather, these clauses stipulate a private arbitration process. Instead of addressing the merits of the case, Gruma successfully moved to compel arbitration.
The Adlers appealed this decision to the U.S. Court of Appeals for the Third Circuit. Bleakley Platt and the Public Justice Foundation represent the Adlers on the appeal. They argue that the arbitration agreement should not be enforced because it denies them access to the court system and the legal protections they deserve. This appeal highlights a key concern about arbitration clauses: their potential to undermine the rights of individuals by limiting their access to the courts.
Audio of the November 6 oral argument can be found here.
The Broader Implications
This case serves as a stark reminder of the potential pitfalls of widespread arbitration clauses. It highlights the need for a careful examination of these agreements and their impact on workers’ rights. The outcome of this appeal will have significant implications for workers’ rights and the balance of power between individuals and corporations. If the court rules in favor of the Adlers, it could limit the ability of corporations to use arbitration clauses to avoid legal responsibility for wrongdoing. This would be a significant victory for those advocating for stronger worker protections and greater access to justice.
Because the outcome of this case could have a profound impact on the future of workplace justice in the United States, the Third Circuit’s decision will be closely watched by those concerned about worker protections and corporate accountability.