By Amanda Leonard, Staff Writer
More than 60 million American employees are subject to pre-dispute arbitration agreements, a required condition of their employment.[1] Pre-dispute agreements dictate that any legal disputes between an employee and an employer cannot be brought in court, but rather, must go through private arbitration.[2] The result is that employees often are unable to sue their employers for violations of federal statutes protecting workers such as sexual harassment, racial discrimination, wage theft, and leave time.[3] Instead, their claims are arbitrated in a system that unfairly favors the employer.[4] Employees who are required to sign pre-dispute arbitration agreements as a condition of their employment are deprived of their right as citizens to access the courts.
The Federal Arbitration Act (FAA) protects the use of mandatory arbitration agreements.[5] The FAA allows for the arbitration of federal causes of action[6] and preempts state laws that restrict the use of arbitration agreements.[7] The Supreme Court upheld the enforceability of mandatory arbitration agreements against employees in Gilmer v. Interstate/Johnson Lane Corporation, holding that the agreements can include a waiver of the employee’s right to pursue a statutory claim in court.[8] Again in 2001, the Court confirmed that the FAA does not exclude all contracts of employment, only those particular to transportation.[9]
Arbitration allows for a quicker and less expensive resolution of claims because proceedings are more informal.[10] However, when employees are forced to arbitrate their claims because of a pre-dispute agreement, they are less likely to win their case, and if they do, their award is usually much lower than what they would receive from a trial.[11] According to Vox, of the 8,209 complaints filed by employees with the American Arbitration Association between 2013 and 2017, only 1.8 percent of those cases resulted in monetary damage awards to employees.[12] The low success rate deters attorneys from accepting claims that involve contractually mandated arbitration and deters employees from seeking legal recourse altogether.[13] In addition, many pre-dispute arbitration agreements also include a waiver of the right to form a class, meaning that employees cannot band together to present their similar claims in court.[14]
Arbitration is not as fair procedurally to employees. An informal system allows arbitrators to decide the standard of proof to be met and can limit evidence and witnesses.[15] Discovery is limited.[16] Employer-drafted arbitration clauses may include shortened time limits for filing claims and preclude recovery of attorneys’ fees and punitive damages.[17] Agreements may indicate which claims the employer can pursue in court, and which the individual employees must arbitrate.[18] Distant locations for the arbitration and biased tribunals are often pre-selected by the employer.[19] A “repeat player” scenario develops because arbitrators often see the same employer multiple times, and may favor the employer because of their familiarity and the potential for future business.[20] Arbitration awards are veiled in secrecy. The employee often does not know how a particular arbitrator has ruled in the past.[21] Employers have the advantage of knowing the past rulings of a specific arbitrator and will favor their selection.[22]
Often pre-dispute arbitration agreements are included in the standard paperwork that employees have to sign as a condition of their employment, creating a “take it or leave it” situation.[23] Some states have addressed the employment requisite by prohibiting employers from requiring employees to sign a pre-dispute arbitration agreement as an employment condition. Critics have taken notice at the federal level a well. The Forced Arbitration Injustice Repeal Act (“FAIR Act”) passed the House of Representatives on September 20, 2019.[24] The bill would invalidate pre-dispute arbitration agreements that require the arbitration of a dispute involving employment, consumer, antitrust, or civil rights.[25]
[1] Alexander J.S. Colvin, “The growing use of mandatory arbitration,” Economic Policy Institute, (Apr. 6, 2018), https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/.
[2] Id.
[3] Id.
[4] Id.
[5] 9 U.S.C. § 1 -307 (2019).
[6] See Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (2000); Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26-27 (1991); Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 482-85 (1989); Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 238, 242 (1987); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985).
[7] See Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 272-73 (1995); Perry v. Thomas, 482 U.S. 483, 490-91 (1987); Southland Corp. v. Keating, 465 U.S. 1, 16 (1984).
[8] Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23 (1991).
[9] Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 109 (2001).
[10] Elizabeth A. Roma, Comment: Mandatory Arbitration Clauses in Employment Contracts and the Need for Meaningful Judicial Review, 12 Am. U.J. Gender Soc. Pol’y & L. 519, 520 (2004).
[11] Colvin, supra note 1.
[12] Alexia Fernández Campbell, “The House just passed a bill that would give millions of workers the right to sue their boss,” Vox, (Sept. 20, 2019), https://www.vox.com/identities/2019/9/20/20872195/forced-mandatory-arbitration-bill-fair-act.
[13] Id.
[14] Id.; See Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019).
[15] Alexia Fenández Campbell, “The House just passed a bill that would give millions of workers the right to sue their boss,” Vox, September 20, 2019, https://www.vox.com/identities/2019/9/20/20872195/forced-mandatory-arbitration-bill-fair-act.
[16] Christopher R. Drahozal, Article: “Unfair” Arbitration Clauses, 2001 U. Ill. L. Rev. 695, 697 (2001).
[17] Id.
[18] Id.
[19] Id.
[20] Roma, supra, note 9, 530.
[21] Id.
[22] Drahozal, supra, note 15, 697.
[23] Roma, supra, note 9, 529.
[24] “All Actions H.R. 1423 – 116th Congress (2019-2020).” Congress.Gov. (Nov. 11, 2019), https://www.congress.gov/bill/116th-congress/house-bill/1423/all-actions?q=%7B%22search%22%3A%5B%22forced+arbitration+injustice+repeal%22%5D%7D&r=1&overview=closed#tabs
[25] “Summary: H.R. 1423 – 116th Congress (2019-2020).” Congress.Gov. (Nov 11, 2019), https://www.congress.gov/bill/116th-congress/house-bill/1423?r=1.
