question mark

Must a New York Party to an Arbitration Agreement Always Agree to and Pay Costs?

When entering business or employment relationships, parties are often presented arbitration agreements – either boilerplate form or customized to the nature of the relationship – for review and signature. These agreements consign the signing party to arbitration of any disputes that may arise between them and the party presenting the agreement. Also, they often set forth obligations of the parties involved related to location, time, procedures, binding nature, and burden of costs for arbitration. Usually the costs fall on the party presented with the agreement, but situations have arisen that indicate this does not always have to be the case even when it was agreed to by both parties.

New York’s View of Arbitration Agreements

New York has a strong public policy that favors utilizing agreed-upon arbitration as an alternate method to litigation for resolving disputes between parties, emphasizing that courts should interfere as infrequently as possible with both the process and any resulting reward. Courts have held that as “a general matter, therefore, a clear and unmistakable agreement to arbitrate statutory wage claims is not unenforceable as against public policy.”

Avoiding Arbitration Due to Cost

Despite the policy favoring arbitration, some people choose to challenge these agreements. Though usually unsuccessful, courts have been willing to entertain some arguments made by petitioners. In 2017 an employee in New York, as part of his employment agreement, agreed to arbitrate disputes between he and his employer in a venue in Florida. In the agreement, the employee would be required to pay the administrative costs and half of the arbitration costs including arbitrator fees. The employee, as part of a class suing on late wage payment claims, objected to the employer’s motion to compel arbitration on grounds he hadn’t agreed to arbitrate labor claims, such an agreement was against public policy, and that the fee splitting provisions made arbitration prohibitively expensive for him given his financial limitations.

Public Policy Concerns

The employee appealed a trial court ruling that compelled him to pursue arbitration. Without ruling as to whether a party could or could not definitively avoid arbitration by claiming financial hardship, the court did recognize the competing public policy interests between the benefits of enforcing arbitration agreements and the idea that a person’s inability to travel and pay for arbitration costs would preclude them from pursuing their claims. Without addressing the issue of whether the employee’s inability to pay arbitration costs would release him from the arbitration agreement, the court remanded the case back to the lower court with a directive that an accounting be made of the employee’s income and assets, as well as all costs associated with the arbitration the employee would be required to pay. The trial court was then charged with determining whether arbitrating at the employer’s expense in New York would remove the employee’s financial concerns and permit him to pursue his claims.

Though this court did not make a firm decision either way, it did deviate from the long-standing attitude that arbitration agreements should be enforced. Though public policy does favor upholding such agreements, the door is open for public policy arguments that may allow parties to avoid arbitration agreements in the future.

New York Employment Arbitration Lawyer

Whether you are an employee or employer, MOWK Law can help with your New York arbitration. Our talented team of employment lawyers will work hard to ensure your success in this popular form of employment dispute resolution. Get in touch with us today.