Dive Brief:

• Arbitration is becoming a go-to strategy for startup employers looking to reduce their workplace risk exposure from employee lawsuits, according to the New York Times.
• The Times, in profiling one such startup, WeWork, says smaller employers are borrowing from large corporations that are increasingly using arbitration to block employees from bringing meaningful legal challenges in court. The Times had conducted an investigation on the overall issue last fall.
• Apart from WeWork, name brands such as Uber and Lyft make drivers sign an arbitration clause. Square, the mobile payment processor, also requires arbitration for workplace disputes. While advocates see it as a great way for employers to reduce risk and keep litigation costs down, critics say it's a way to deny employees their legal rights.

Dive Insight:

The Times notes that arbitration clauses may go against the focus on transparency among today's startups, adding that arbitration is a secretive process that stacks the deck in favor of employers. That secrecy, federal labor officials said, can allow widespread problems to persist because the process bars employees from sharing their experiences with others who might be in similar positions.

“They give their young workers Ping-Pong tables and take away their constitutional rights,” Cliff Palefsky, an employment and civil rights lawyer in San Francisco, told the Times.

Recently, the Consumer Financial Protection Bureau proposed a rule limiting financial companies from using arbitration to prevent customers from filing class-action lawsuits, but the rule won't apply to arbitration used in employment disputes.

A combination of low-paid employees and increased pressure to show a profit is driving startups to change their labor practices, according to the Times

WeWork’s arbitration requirement led to the firing of Tara Zoumer, who believed her job entitled her to overtime pay. She refused to sign the company's new arbitration clause and was fired. Now, she's suing WeWork hoping she will be able to discredit and overturn the arbitration clause. Zoumer’s lawyer, Ramsey Hanafi, filed the case in December over wrongful termination and unfair labor practices.