What is “Forced Arbitration?”
We get it, it’s a strange phrase that no one uses in their everyday life. But a simple “forced arbitration” clause could mean the difference between having your voice heard in court or being locked out of the courtroom forever.
These “forced” or “mandatory” arbitration clauses tend to appear most often in consumer and employment contracts. The idea is to protect a company from lawsuits by having you sign something, often in the fine print (that women don’t read), that essentially says that you cannot sue the company in court – instead, you agree to enter “arbitration” with the company over any potential issue (whether it’s workplace discrimination, workplace harassment, etc.). The arbitration often puts limits on what claims you can bring and sets parameters, such as, allowing the company to decide who presides over it and where it will takes place (read: these decisions are made by the company and biased in their favor!) The arbitration is set up purely for the company’s convenience.
Bottom line: “forced arbitration” is bad news for regular people. It tips the scales in favor of large corporations and takes away your right to have your voice heard in court. That’s why we believe it’s so important to educate women about it.
The ability to bring lawsuits against powerful people and corporations is an important accountability tool. As A Case for Women documents, lawsuits can also “create lasting, powerful change.” Public Citizen shares that view and has been fighting for 50 years to ensure that every person has access to the civil justice system when wronged. Too often, however, companies find ways to escape accountability through the courts, which has the double effect of leaving those who have been harmed without recourse and allowing corporate wrongdoers off scot-free for future illegal behavior because of the chilling effect against bringing additional lawsuits.
Workplace harassment, including sexual harassment and gender-based discrimination, is a pervasive problem in the United States. However, forced arbitration clauses—non-negotiable terms in everyday contracts requiring future claims to be brought in private forums where the law or legal precedent are not even required to be followed– prevent women from vindicating their rights in court. According to the National Employment Law Project, “Black workers (59.1%) and women workers (57.6%) are the most likely to be subject to forced arbitration.” Forced arbitration is particularly pernicious in the workplace context because these clauses can be used to protect perpetrators and companies from claims of sexual assault and allow companies to sweep systemic issues of discrimination and harassment under the rug because these claims are decided behind a veil of secrecy. In other words, forced arbitration is successfully used to silence women’s voices.
Forced arbitration clauses are in the fine print of “take-it-or-leave-it” agreements that are ubiquitous in worker and consumer contracts. These clauses deprive people of their right to seek justice in court before an impartial judge or jury when they are harmed even when it is a matter of civil or gender rights. Contracts that include forced arbitration clauses may designate:
- The arbitration provider, who often relies on the company for repeat business and therefore may be biased in the company’s favor;
- The arbitration rules, which provide few of the legal safeguards that protect individuals who bring their claims in courts of law;
- The state in which the arbitration is to occur; and
- The payment terms, which can include high filing fees and “loser pays” rules that make arbitration prohibitively expensive for harmed individuals.
Forced arbitration clauses were never intended to silence harmed individuals. Congress passed the Federal Arbitration Act (FAA) in 1925 to give companies of relatively equal bargaining power the ability to settle commercial disputes outside of court. Unfortunately, for the past thirty years, the U.S. Supreme Court has reinterpreted the FAA to drastically expand its scope of coverage. As a result, big corporations use arbitration clauses as a blank check to block workers’ and consumers’ access to courts, hide systemic wrongdoing from the public, and minimize corporate accountability.
(If you’re a company and you tuck [a forced arbitration] clause into virtually anything you can make an employee or consumer sign, you can essentially absolve yourself from almost any form of corporate misconduct, is that correct?)
According to the Economic Policy Institute, individual consumers seeking relief in arbitration win just 9 percent of the time. More than 60 million workers are subject to forced arbitration. By 2024, it is estimated that more than 80 percent of private-sector, nonunion workers will be subject to forced arbitration. According to a national survey, 84 percent of the public supports federal legislation that ends the practice of forcing consumers and workers into arbitration. Republicans support the legislation more than Democrats (87% to 83%).
That’s why Public Citizen is leading the way to pass the Forced Arbitration Injustice Repeal (FAIR) Act. The FAIR Act would prohibit forced arbitration for employment, consumer, antitrust and civil rights disputes. It would keep companies from forcing individuals, workers, and small businesses to agree to be bound by arbitration before a dispute has occurred. Rather, every person would have the choice to agree to arbitration after a dispute has occurred. It would also give every wronged person—including those who want to publicize their story of discrimination or sexual harassment—the ability to do so.
Public Citizen helped pass the FAIR Act in the U.S. House of Representatives in 2019 and is working to pass it again this year—and building momentum to have it signed into law. You can get involved by ensuring that your representative and senators support passing the FAIR Act. A committee markup and floor vote in the House is expected soon. Public Citizen is not just working with Congress to expand the ability of harmed individuals to access the courts. In November of 2020, Public Citizen laid out a blueprint for the incoming administration on expanding access to the civil justice system and has been advocating) with the White House) for implementation of these necessary reforms. Last week we had a big victory– President Biden signed an executive order aimed at expanding access to justice and counsel for all people. The order directs the Department of Justice to detail what it will do to expand access to justice and revives an Obama-era interagency task force to make recommendations. These steps are incredibly important to ensure all people—including women— have access to an open and transparency civil justice system. We look forward to working with the Biden-Harris team to implement our entire civil justice blueprint—and hope that the work we are doing now is just the beginning of a new era heralding in deeper equality and gender equity for all.