An Employee Perspective On Arbitration Agreements.
If you work in finance, you know about the Financial Industry Regulatory Authority (“FINRA”). This is the entity that regulates disputes between financial institutions, brokers, dealers and other individuals registered with the FINRA. You can check if your company or you are registered with FINRA and hence, are bound by their arbitration rules at https://brokercheck.finra.org/.
Why do you need to know this? If you are an “associated person” working for a company registered with FINRA, then you are required to arbitrate your disputes with FINRA. Generally, FINRA covers disputes that arise out of the securities business activities of the member company and the associated person, you. This involves disputes raised by investors as relates to financial transactions or by brokers against their company as relating to securities transactions.
FINRA does not require that employee discrimination and whistleblower claims be arbitrated per statute. However, in the financial industry, many employers include arbitration clauses in employment related agreements.
Employers, especially large ones with public reputations, prefer arbitration clauses for several reasons:
- Arbitration is a confidential process; there are no public filings or hearings which can impact their reputation;
- Arbitration is more expensive than state court, with the filing fees ranging in the many thousands of dollars depending on the disputed amount while state court filing fees rarely exceed $500;
- Arbitrators are attorneys currently working with or formerly associated with large firms, which means that they generally practiced on the employer’s side of the equation; and, the most important reason of all,
- No jury trial.
If you or a friend works in the financial industry and are anticipating an employment issue against the employer, here are some things to do in preparation for your meeting with a lawyer:
- Gather all of your employment documents (offer letter, stock grants, bonus awards, non-competes, confidentiality agreements etc.);
- Check for references to arbitration in the employer’s HR portal;
- Print out anything that relates to the arbitration requirements for your attorney to review.