The American Civil Liberties Union and other legal groups are pressing a major arbitration provider to stop enforcing workers’ employment debts, saying the cases amount to “indentured servitude.”
The ACLU sent a letter Monday to the American Arbitration Association, or AAA, urging the group not to hear disputes involving “stay-or-pay” agreements. Such contracts require workers to put in a minimum amount of hours before quitting or else they’ll have to pay the employer thousands of dollars to cover travel, training and other alleged costs.
As a HuffPost article detailed last year, foreign-born nurses who quit their U.S. jobs are being taken to arbitration and forced to pay thousands of dollars to the staffing firm that recruited them, a company called MedPro International. Nurses claim they were misled about how much money they would earn in the U.S. and resigned out of desperation.
The employment contracts include a mandatory arbitration clause, which keeps the disputes out of court and prevents nurses from banding together to counter-sue in class-action lawsuits.
“Legal groups say the contracts force workers to choose between ‘coerced labor and catastrophic financial harm.’”
One nurse from India told HuffPost she never received notice of her arbitration proceedings until they were over; the judgment against her came to $30,000, plus attorney’s fees to defray the company’s litigation costs. The case was overseen by the AAA, a nonprofit that bills itself as “the world’s largest private global provider of arbitration services.”
A dozen other legal and labor rights groups joined the ACLU in saying they were concerned such proceedings lack “fundamental fairness” and force workers to choose between “coerced labor and catastrophic financial harm.”
“By continuing to administer arbitrations of ‘stay or pay’ provisions… the AAA essentially facilitates indentured servitude and endangers its legitimacy as an impartial tribunal,” the groups wrote.
AAA said in a statement that it is “committed to administering employment arbitrations fairly and equitably” and would review the ACLU’s concerns. It also said that “substantive legal determinations” ― such as whether stay-or-pay contracts violate the law ― are for judges and arbitrators to decide, “not the AAA itself.”
Employers often pitch arbitration as a quick way to resolve disagreements and avoid costly legal battles in court. But many workers don’t have the means to pay for an attorney out-of-pocket and could struggle to find one to take the case on contingency, in which a lawyer receives a percentage of any award granted their client rather than a set fee, since any payout is likely to be modest.
“Airline pilots and even dog groomers have been taken to court after quitting in recent years, with companies claiming they owe thousands of dollars in training and other costs.”
Arbitration experts told HuffPost the MedPro cases were unusual in that the workers could be on the hook for additional legal fees if they lost, compounding their debts. The ACLU and its allies argued such a prospect discourages workers from even mounting a defense.
“Workers are threatened with thousands more in arbitration costs and attorney’s fees if they defend themselves in arbitration,” they wrote.
HuffPost has reported on several industries where employers use repayment agreements that lock workers into their jobs, preventing them from taking a competing offer with higher pay. Airline pilots and even dog groomers have been taken to court after quitting in recent years, with companies claiming they owe thousands of dollars in training and other costs.
Some federal regulators have been trying to crack down on employment contracts that can leave workers in debt. The National Labor Relations Board recently brought a case against a medical spa chain for allegedly trying to make aestheticians pay back at least $50,000 after resigning. The company ended up paying more than $25,000 to two workers in a settlement.
The Federal Trade Commission has also proposed outlawing training repayment contracts as part of its federal rule banning non-compete agreements.
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The antitrust enforcer says the contracts illegally suppress workers’ wages by trapping them in their jobs, but it isn’t clear whether the rule will survive court challenges from employers. A judge appointed by former and future President Donald Trump blocked the rule from taking effect last summer, putting its future in limbo.