The Dark Side of Forced Arbitration

Do you recall that thick stack of papers you were asked to sign when you got your last job? Did you read the fine print on the contract you signed when you bought your last car?

If you’re like most of us, you don’t remember what you signed and you didn’t read every page of that agreement. And in general, you won’t ever need to know what all that legal verbiage means anyway. It is only important if something dire happens; maybe your boss makes you feel unsafe at work, or you discover mold growing under your car cushions. Suddenly, you have to seriously consider taking legal action.

Imagine your surprise when you get that paperwork out and discover that you signed away your right to take legal action. The fine print stated something like, “All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”

By affixing your signature to that clause, you’ve inadvertently given away your right to file a lawsuit about the incident or product. Instead, arbitration is the mandatory method of resolving the dispute. The employer or company will hire an arbitrator to hear the case in secret, there can be no appeals, and the results are not to be made public by anyone. You as the complainant will not be able to join with others who may have suffered the same loss in a class-action suit. 

Arbitration is an administrative process, so the complainant does not have the chance to go before a judge or jury to state their case.  The arbitrator does not have to weigh the facts of the case against any law or legal precedent. Even worse, the arbitrator’s decision is binding, with no chance of an appeal.

Forced arbitration can have serious consequences, even being used to deny employees protection under laws such as the Civil Rights Act and the Equal Pay Act. By unknowingly signing away their rights to sue, workers have no legal recourse in issues like discrimination, harassment, abuse, retaliation, or wrongful termination. 

A recent example of this is illustrated in Williams v. FCA US LLC in May 2018 (Michigan). The employees of Fiat Chrysler, including the diversity manager, tried to bring a class-action lawsuit against the company stating that the employee performance evaluation system discriminated against salaried, nonunion black workers. Most of the cases were thrown out because those employees had signed an arbitration clause when they were hired. The diversity manager was ostracized and reprimanded for his part in reporting the problems.

For consumers, forced arbitration prevents them from holding businesses like nursing homes, home builders, and manufacturers accountable for serious defects or wrongdoing. For example, if you found that your elderly father was being abused in a nursing home, a forced arbitration agreement would prevent you from filing for damages. In Colorow Health Care LLC v. Fischer. 2018 (Colorado), an arbitration clause was ultimately upheld by the Colorado Supreme Court even though a resident was killed by a nursing assistant. The resident’s family was forced into arbitration instead of being able to sue the facility and the employee, who was only charged with third-degree assault. 

Arbitration in itself is not the problem; it can be a useful tool to resolve disputes fairly if it is the process of choice of all parties involved. It has only become a problem because is it forced on employees and consumers, usually without their knowledge. It also denies those forced into its arena of the basic tenets of the American justice system: a level playing field and the right to a fair trial.


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