The Red Guide to Temp Agencies

Tips for Temps: Contractors and Mandatory Arbitration

Angus B. Grieve-Smith

Just about every agency requires its temps to sign a contract of some sort. In some fields (including mine, computer support) it is common for agencies to require a contract for each assignment. Occasionally, agencies may include a clause mandating binding arbitration in these contracts; depending on circumstances, this can be a benefit or a detriment to the temp. In this tip I explore some of the issues regarding arbitration, and share some of my experiences.

Earlier this year a recruiter from RHI Consulting asked me to come into the office for an interview. Before meeting with him, a junior recruiter sat and spoke with me, and handed me a contract which he said I needed to sign before they even sent my name out to potential clients. Although he was friendly, and encouraged me to look over the contract before signing it, he seemed a little impatient that I was actually taking the time to read it in detail. I was struck by one clause in particular, which went something like this:

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

This, as I later discovered, was the Standard Arbitration Clause of the American Arbitration Association, and it disturbed me. I had signed some strange things in the past, from bank-fee increases (lots of those) to consent to urine testing to waiver of jury trial, but this seemed to be going too far. Who was this American Arbitration Association, and why should I let them settle my controversies? What happened to due process and the National Labor Relations Board?

I expressed some of these reservations to the junior recruiter, and he immediately tried to put me at ease. Unfortunately, he didn't seem to know anything about the clause either; he tried to tell me that I wasn't signing away my right to sue, which I clearly was, and he had never heard of the NLRB (I didn't bother to enlighten him). This discussion was cut short by the arrival of the senior recruiter, who immediately tried to pressure me into interviewing for jobs I had no interest in. I wound up signing the contract and going on an interview for one of these jobs, but soon after I got a much better job and a contract without that clause. I never called RHI again, although I did keep in contact with their permanent placement division, which had given me a much better feeling.

At my latest assignment, however, I encountered that same clause again on the contract with Phoenix Communication (along with a lot of "non-competition" weirdness which would worry me if I had any intention of moonlighting). Unlike RHI, I felt a lot more comfortable with the people at Phoenix, but signing a contract with an organization is not personal; how was I to know I would be dealing with the same people in a year? Before signing anything, I decided to explore this issue in a little more detail.

An acquaintance of mine said that arbitration has always been valued by labor; you can avoid a drawn-out, messy civil suit by just picking an arbitrator or three and having a hearing. No futzing around with courtrooms and legal briefs; you can even have the hearing over the phone in some cases (maybe that's why it's called a hearing?) and that's at least one day you don't have to wear a suit.

Okay, but who was this American Arbitration Association? According to their web page, a nonprofit group established by businesses in the 1920s to streamline dispute resolution. From everything I've seen, they're the largest and most respected arbitration group in the country. They have a lot of regional offices, and they like to spell things out; a glance around their web page shows that they have a rule for just about everything. So if you're going to find an arbitrator, they seem like your best bet. Fair enough.

I then looked through the Commercial Arbitration Rules mentioned in the Standard Clause, and the first thing that struck me was the fee structure. According to the July 1, 1996 rules, everyone who files a claim has to pay a minimum $500 filing fee (it's more if there's more money in dispute). If someone files a claim against you, and you want to file a counterclaim, that's a minimum $500 from you. Each hearing costs at least $150 for each party, and both parties split the cost of arbitrator travel, hearing room rental, and such. I've heard of discouraging frivolous lawsuits, but this is a little much.

The other thing that concerned me was that the AAA arbitrators are not bound by the same legal and constitutional restrictions as the courts are, specifically relating to issues of evidence and discovery. The AAA commercial rules state quite clearly (in section 31) that "conformity to legal rules of evidence shall not be necessary"; in other words, they can still take into account illegally seized evidence. But that doesn't even matter; nothing in the rules states that the arbitrator is required to state any justification for the award.

Even these rules and fees are not so bad if I voluntarily agreed to them; however, there is a big difference between two parties with conflicting claims deciding to submit them to arbitration, and agreeing to arbitration before any conflicts arise. Also, I was worried that if I refused the clause, I would not be allowed to continue the assignment. Even though the market is fairly favorable for computer temps, I had just begun this assignment, and it was a good one. Without talking to anyone, I felt a lot of pressure not to rock the boat, and to simply sign the contract and send it in.

It turns out that I wasn't alone in feeling the way I do. I found a document on the AAA web site, entitled "The Future of Employment ADR--New Rules for New Challenges," by John M. True III, Esq. Mr. True, an arbitrator for the AAA, noted that both the Equal Employment Opportunity Commission (EEOC) and the NLRB, as well as several federal courts, had taken the position that if binding arbitration agreements are required as a condition for employment, this violates the employee's due process rights. Mr. True, along with a number of his colleagues in California who agreed with this position, came up with the California Employment Dispute Resolution Rules to try and rectify this situation. These rules were later adopted by the Association as a whole as the National Rules for the Resolution of Employment Disputes. However, the contract specified the Commercial Arbitration Rules, and I could imagine an unscrupulous agency arguing that I was a contractor, not an employee.

Fortunately, this all was resolved rather quickly. I had in fact mentioned "weird arbitration clauses" when my recruiter told me she was sending a contract to me to be signed. At the time, she said she didn't think there was anything like that in the contract. After my research, I pointed out the clause, and she admitted that she hadn't noticed it before. After talking to her superior, she told me I could simply cross out the clause and initial the strikeout, and that was that.

So what are the tips to be taken from this story? First, always try to deal with people that you like and feel comfortable with. Second, keep the lines of communication open; keep the recruiters aware of your concerns. Third, be informed; the Net is a powerful tool for finding out about organizations and policies. Fourth, don't be afraid to rock the boat, but do it with respect for everyone involved. (If you don't have respect for them, see the first point.)

What can you do if you're confronted with one of these Standard Clauses and the agency refuses to let you strike it out? First of all, ask them to change the clause to make it the National Rules for the Resolution of Employment Disputes, rather than the Commercial Arbitration Rules. Second, see if you can arrange an agreement on fee apportionment, given that agencies usually tend to have more capital available than temps do. If that fails, try complaining to the AAA, the EEOC or the NLRB. If all else fails, register with an agency that'll treat you right and find another assignment! [an error occurred while processing this directive]