- Forced Arbitration
- Press Room
- In the News: Forced Arbitration in Financial Services (CFPB)
One strategy the corporate lobby uses is to blur the line between mandatory arbitration, which frequently allows corporations to violate laws intended to protect ordinary Americans with impunity, and other, consumer-friendly ways of resolving disagreements that don’t involve taking someone to court, such as mediation (often called “alternative dispute resolution”). For example, corporate lobbyists often cite a 2005 national survey, funded by the U.S. Chamber of Commerce Institute for Legal Reform, as finding that a majority of adults with experience of arbitration considered arbitration faster, simpler, and cheaper than going to court. But this survey was not representative of people’s experiences with pre-dispute, mandatory, arbitration: only 19% of the respondents were required by contract to go to arbitration; the vast majority (81 percent) had voluntarily chosen to enter the arbitration after the dispute arose.1
- In mediation, two parties voluntarily agree to resolve their differences with the help of a neutral party or mediator. “Either party can walk away if they think they are getting a raw deal.” There are a lot of community-based, non-profit, impartial, mediation groups. Mediation is usually a fair and efficient form of alternative dispute resolution.
"Mediation is a fabulous process. It does indeed usually reduce costs and resolves claims quickly. But it is not to be confused with mandatory arbitration.” Cliff Palefsky, civil rights lawyer and a co-founding member of the National Employment Lawyers Association2
- Arbitration is binding. Once two parties enter into arbitration, “they are stuck with whatever decision the arbitrator makes,” with essentially no right to appeal to a court of law. Two parties can voluntarily agree to arbitration, meaning that after a dispute between them arises, they agree to take it to binding arbitration for a decision.
- Mandatory arbitration occurs “when a company either traps a person into arbitration by refusing to do business with or employ them unless they agree to arbitrate future disputes, or tricks a person into signing an arbitration clause buried somewhere in a lengthy contract,” employment application, or the like. This frequently happens in the workplace: workers are required to sign a binding mandatory arbitration clause as a condition of getting a job, or are ordered to do so afterwards with the risk of being fired on the spot.
When a person is trapped or tricked into signing an arbitration clause, the company gets a virtual carte blanche to violate the law. According to a study of almost 20,000 binding mandatory arbitration decisions in credit card disputes, the corporate party prevails a massive 94% of the time.3
“When speaking about mediation and arbitration, it’s important to keep in mind one very simple point: it is fine to ask someone to walk through a door, but it is never ok to push them out of the room.”
1. Harris Interactive, “Arbitration: Simpler, Cheaper, and Faster Than Litigation,” http://www.adrforum.com/rcontrol/documents/ResearchStudiesAndStatistics/2005HarrisPoll.pdf (April 2005) (at p. 9). Nor is this survey at all applicable to employment arbitration; fewer than three percent, if any, of the arbitrations covered by the survey involved claims of discrimination, wage theft, or other illegal employment practices (at p. 12).
2. E-mail correspondence, February 13, 2009, on file with NELA.
3. Public Citizen report, http://www.citizen.org/pressroom/release.cfm?ID=2519
The Miami Herald, April 23, 2015, How to better protect students (part of a Miami Herald series, The Higher-Ed Hustle)
The New York Times, March 16, 2015, Failed by Law and Courts, Troops Come Home to Repossessions