An estimated 15 percent to 25 percent of American employers have adopted forced arbitration policies. This means that more than 30 million employees (1 out of every 4 non-union workers) have given up their right to go to court. Instead, their contracts designate an arbitration firm selected by the employer to resolve any disputes. Forced arbitration clauses effectively allow employers to shield themselves from the purview employment laws. This should alarm every worker in the United States.
The use of forced arbitration to settle employment claims has risen rapidly since the early 1990s. In 1991 Congress made jury trials and money damages available under Title VII., In 1992, Congress passed the Americans with Disabilities Act. But these expansions of workers’ protections were undermined in 1991, when the Supreme Court permitted an employer to force its employees to resolve disputes in arbitration.
Here’s how mandatory arbitration has affected Fonza Luke of Alabama:
Luke, a mother of four and a grandmother, started working as a licensed nurse practitioner for Baptist Health Systems (BHS) at its Medical Center in 1971. In November 1997, she was told she must sign a form agreeing to the company’s new “Dispute Resolution Program,” which relegated employees to arbitration to seek redress for legal claims. Luke did not want to forfeit her rights. Despite twice being told that she would be fired if she did not sign the agreement, she refused to sign it. Three years later, Luke was fired for “insubordination” after almost 30 years of working for BHS with high performance ratings. As a 59-year-old African-American woman, Luke believed she was fired due to her race and age, so she filed claims with the U.S. Equal Employment Opportunity Commission (EEOC) and then in federal court. Even though she had never signed an agreement calling for her to settle disputes in arbitration, BHS asked the federal court to dismiss her court case on the basis of the company’s arbitration policy. The federal court said that BHS could force her to arbitrate because she remained in her job after company officials presented the arbitration agreement to her. A federal appeals court ordered her into arbitration. According to her lawyer, it was impossible for Luke to get an unbiased arbitrator. As a result, her claims of discrimination and retaliation were denied, and she got no relief whatsoever.
President Obama issues an executive order that forbids federal contractors from requiring employees to enter into predispute arbitration for discrimination and torts related to sexual harassment and sexual assault claims.
The New York Times, July 15, 2014, Arbitration Clauses Let American Apparel Hide Misconduct
The Nation, July 8, 2014, How Consumers Are Getting Screwed by Court-Enforced Arbitration
American Banker, May 13, 2014, Mandatory Arbitration Offers Bargain-Basement Justice
Consumer Reports, May 9, 2014, Ban the use of forced-arbitration clauses in consumer and employment contracts
Reuters, April 24, 2014, Schwab drops ban on clients filing class-action lawsuits
The New York Times, April 18, 2014, How Payday Lenders Prey Upon the Poor — and the Courts Don’t Help