It’s Time to End Forced Arbitration Completely

It’s Time to End Forced Arbitration Completely

It’s Time to End Forced Arbitration Completely

Congress essentially admitted that forced arbitration is a corrupt practice—but only banned it in one area.

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It’s hard to believe, but Congress just passed meaningful legislation: In February, lawmakers approved the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act. Emerging from the Me Too movement and stories of women being forced into private arbitration instead of getting their day in court when they brought sexual harassment claims against their employers, the law will ban businesses from including such provisions in employment contracts.

The law promises not only to offer the individual victims of workplace sexual harassment and assault more relief by allowing them to bring their claims in court, where they have a better chance of prevailing, but also to shed more light on the epidemic of sexual harassment by making it harder for companies to push these claims out of sight.

However, forced arbitration is not just a problem for sexual harassment victims. Employers apply it to other workplace claims as well, such as gender discrimination, racial discrimination and harassment, violations of the Americans With Disabilities Act, failures to follow the Family and Medical Leave Act, and wage theft. Congress has now essentially admitted that forced arbitration is a corrupt practice—one that deprives workers of justice and keeps wrongdoing in the dark—but it has banned it only in one area. This is a fraction of the solution we need, which is to end forced arbitration completely.

Forced arbitration was once illegal. But after Congress passed a law in 1925 that allowed its use in contractual disputes, the Supreme Court repeatedly expanded its scope such that it can be applied to almost any dispute, whether between a worker and an employer or a consumer and a corporation. Instead of a hearing before a judge and a jury of one’s peers, arbitration takes place in private, in front of a retired judge or lawyer who is often picked by the corporation and is likely friendly to its position.

The practice has proliferated rapidly. Today, it’s estimated that over half of nonunion private sector workers, or more than 60 million Americans, have signed contracts that require them to file all complaints through arbitration instead of the courts. Low-wage workers are especially likely to be subject to forced arbitration.

That’s terrifying for workers, because the likelihood that they’ll receive justice in arbitration is far lower. Employees win in arbitration only about 20 percent of the time, compared with nearly 60 percent when they bring their complaints to state court. They also stand to get far less money: The average damages for aggrieved workers in arbitration are just $23,548, compared with $143,497 in federal court and $328,008 in state court.

And that’s when workers bring cases. It takes courage to speak up about mistreatment in the workplace, given that retaliation is incredibly common and workers put their livelihoods on the line. Arbitration makes it even less likely that they will bring cases, because they know the deck is stacked against them. One analysis found that over 98 percent of the claims that should be expected to be brought by workers never get filed. The cost of forgoing justice adds up quickly: In 2019, low-wage workers lost $9.27 billion in back pay that they were owed due to wage theft because they failed to file arbitration claims.

The practice doesn’t just hurt workers. Consumers often have to sign forced arbitration clauses as well; in a 2014 study, nearly 88 percent of mobile phone provider agreements included them. The process is extremely lopsided. While companies are almost always represented by a lawyer, only about 60 percent of consumers are. The average consumer will end up paying a financial institution, not the other way around.

The good news is that some federal lawmakers won’t let the issue rest. In March, the House of Representatives passed the Forced Arbitration Injustice Repeal Act, which would ban the practice in all employment and consumer disputes. But the bill didn’t have the same bipartisan support that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act enjoyed—just one Republican backed it, compared with the 113 Republicans who voted for the Me Too bill—and the Senate has yet to act on its version.

Sexual harassment and assault victims deserve their day in court. But so do people of color who are called racial epithets at work, restaurant servers whose bosses steal their tips, and people with disabilities who aren’t given the accommodations they need to perform their work. Congress shouldn’t leave them behind.

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