By the time Leah Turner sued her employer, she had worked hundreds, possibly even thousands, of hours at Chipotle without getting paid. Turner’s manager would regularly tell her to “clock out” from work, but still require her to work extra hours unpaid. Turner’s boss would even sometimes retroactively go back into the system and delete hours that people had already worked. Eventually, Turner moved to a different store, only to find that wage theft was rampant there too. In 2013, Turner decided to fight back. Along with thousands of Chipotle workers, Turner filed a class-action wage-theft lawsuit against Chipotle, demanding back pay that the chain had stolen from its own workers. Individually, low-wage workers’ claims were too small to cover legal fees—but together, they could hold the company accountable.
The Chipotle workers had evidence on their side. But last year, thousands of the workers in Turner v. Chipotle were tossed out of court because of a little-known legal loophole written into the fine print of their employment contracts: a forced-arbitration clause.
Thousands of Chipotle workers had unknowingly signed “mandatory arbitration agreements,” buried deep in the fine print of their HR paperwork, waiving their right to sue over illegal treatment at work, like sexual harassment, race discrimination, and wage theft. Instead of going to court, people who have signed forced-arbitration agreements are legally required to settle their claims with a private third-party arbitrator. These arbitrators are often handpicked by the defending company and paid by that same company to the tune of $1,000 to $2,000 a day. Arbitrators’ determination is final, binding on both parties, and virtually unreviewable by courts.
Forced arbitration effectively operates as a secretive, privatized justice system that is stacked in favor of big corporations. The Economic Policy Institute estimates that workers subject to mandatory arbitration win just 38 percent as often as they would in state court and 59 percent as often as they would in federal court. Even when workers do win, they only get a fraction of the damages. Consumers subject to forced arbitration fare just as poorly. Public Citizen found that consumers only won in 6 percent of arbitrations against financial institutions in California. Arbitration’s opacity and lack of procedural safeguards undoubtedly benefit companies who are repeat players in the arbitration world. The threat is growing: As of 2017, more than 60 million American workers have signed forced-arbitration agreements in their employment contracts, and 81 of the largest 100 US companies have forced-arbitration clauses in contracts with their customers for financial products, cell phones, and more. The game was always rigged against working people—now, they might not get to play at all.
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That’s why we launched the Pipeline Parity Project, a grassroots campaign of law students fighting to end forced arbitration, stop workplace discrimination, and unrig the legal system. We came to law school to hold powerful corporate actors accountable for ripping off consumers, violating their workers’ rights, or discriminating on the basis of race, gender, or disability. But our future clients may never get their day in court in the first place because of forced arbitration and corporate lawyers who use legal jargon to cover up the ways that they’ve stacked the rules to favor big corporations. As future lawyers, we think it’s our responsibility to take them on.
When we started Pipeline Parity Project last spring, we were just a small group of Harvard Law School students furious about a rigged justice system. Just one year later, organized students have secured unprecedented disclosure of forced arbitration in the legal profession and forced some of the country’s largest firms to drop arbitration agreements. Now, we’re building a national network of law students who are trying to rewrite the rules that protect the powerful at the expense of the little guy.
Last year, at the height of the #MeToo movement, many law firms began writing forced-arbitration clauses into their contracts with their employees, including summer interns. Some forced-arbitration clauses explicitly required firm employees—not just attorneys, but also summer interns, legal secretaries, and custodial staff—to sign away their right to sue under Title VII of the Civil Rights Act, which prohibits sex discrimination (including sexual harassment) at work. As #MeToo reminds us, survivors are still rarely believed unless they come forward together. If companies require survivors of sexual harassment to arbitrate grievances individually, they can more easily sweep sexual harassment under the rug.
The problem is that many arbitration clauses include “class action waivers,” which require people to give up their right to participate in a class-action lawsuit. Class-action lawsuits allow workers and consumers who’ve been ripped off in the same way to put their limited resources together to sue a larger entity. Take the Chipotle workers. The typical Chipotle crew member makes just $9 an hour and probably can’t afford to hire an attorney. Besides, most workers’ claims ranged from $50 to a couple thousand each. If you’re one of the six in 10 Americans who couldn’t cover an unexpected $500 bill, that’s a lot of money—but hiring a lawyer almost certainly costs much more. With a class action, regular people can level the playing field and deter companies that would rather hide illegal conduct under the rug by distributing its effects among many people. But forced to arbitrate cases on their own, regular people may not be able to access the justice system at all. Most workers, knowing they are unlikely to succeed individual arbitration, choose never to bring claims at all.
Wells Fargo made headlines in 2016 when it became known that the company had fraudulently set up millions of fake accounts for real consumers. Regulators eventually caught on and fined the company $185 million. But absent government action, consumers would have been left in the dust; Wells Fargo’s contracts contained forced-arbitration clauses. In fact, consumers who attempted to sue over the fake accounts years earlier had been thrown out of court.
Courts often refer to forced-arbitration clauses as “agreements.” In reality, they’re anything but. Many arbitration clauses are part of “clickwrap” contracts: Those online forms where you “click to agree to the terms and conditions.” In a 2015 study, the Consumer Financial Protection Bureau found that consumers are rarely aware that their contracts contain dispute-resolution clauses. Even when people spot an arbitration clause lurking in a contract, they may have no choice but to accept it. If you won’t sign a forced-arbitration clause with your bank, phone company, cable provider, then you can’t get the service. A restaurant worker or nurse who refuses to accept a forced-arbitration agreement might lose their job. In other words, regular people literally have no choice but to accept the terms if they want to have access to goods or even to their jobs. Companies know that consumers and workers can’t give up important services, like having a cell phone, to argue fine-print contractual terms, so there is no meaningful market competition regulating the use of forced-arbitration agreements.
The Supreme Court has made it virtually impossible for workers and consumers to fight arbitration clauses in court—but we can organize to make sure companies don’t force people to sign them in the first place. We led a campaign to make the nation’s most prominent law firms disclose whether they force employees to sign arbitration clauses, then successfully pushed several major firms to stop using forced-arbitration clauses in their employees’ contracts. We’re not the only people fighting forced arbitration in our workplaces: We work alongside Google employees who led a campaign that recently forced Google to get rid of the clauses in their employment contracts. Companies rely on the people who work for them, and that gives us the power to demand equitable, decent working conditions.
But as future lawyers, we know that going workplace by workplace to end forced arbitration isn’t enough. We want to make sure our future clients aren’t locked out of the legal system because of contractual fine print. And we want our future colleagues to realize that forced arbitration unethically prevents the disempowered from accessing justice. We need legislation to end forced arbitration altogether, for everyone.
In the 1920s, Congress passed the Federal Arbitration Act (FAA). Legislative history shows that the FAA was meant to apply to big companies arbitrating disputes with other big companies on an equal playing field. It even had an explicit exception for employment contracts. The FAA was primarily addressed at making sure federal judges enforce arbitral awards; its authors never fathomed it would be used to uphold unconscionable forced-arbitration clauses.
But the Supreme Court has vastly extended the reach of the FAA, finding that it protects not only the outcomes of arbitrated disputes but forced-arbitration clauses themselves. Because the Supreme Court, especially Trump appointee Justice Gorsuch, is so arbitration-friendly, states are effectively barred from limiting forced arbitration. That means we need federal legislation. Federal agencies have tried: In 2017, the Trump administration and Republicans in Congress blocked a rule from the CFPB that would have limited the use of forced-arbitration agreements in consumer finance contracts.
That’s why we support the recently reintroduced FAIR Act, which would amend the FAA to ban the use of forced arbitration in employment, consumer, and health-care contracts—in other worse, it would limit forced arbitration in cases where there are severe asymmetries of power between the parties and the FAA was never supposed to apply.
Forced arbitration is bad for workers, bad for consumers, and bad for the justice system. The deck is already stacked in favor of large corporations. We’ll pursue legislative, advocacy, and legal means to level the playing field so our future clients can have their day in court.
