You have probably signed one of them. They are everywhere, and your only choice is: Take it, or leave it. You may not even realize what you have lost. Yes, predispute arbitration agreements are everywhere these days. Fill out a job application, and it likely says that you have waived your right to a trial over any dispute that arises out of employment or your application. They may be buried somewhere in your employment manual. And whether you rent a movie or move, the price of getting service is signing an "agreement" that you waive your right to a trial.
In its place you get some form of alternate dispute resolution. Sounds nice and friendly, but, believe it or not, in some cases, the person who arbitrates your termination is the HR director or equally biased adjudicators.
Or to get to ADR, you must agree to pay thousands of dollars to pay an arbitrator. In a trial, you do not pay the judge and if you are poor, you fees are waived. Arbitrator fees are so high, you may decide to just walk away.
And the maddening things is that the Supreme Court has approved this wholesale loss of legal rights created by Congress.
Halliburton contractors signed them without even realizing what they meant, and, as a result, have to right to recover for even grievous injuries. link
Bad for the underdog
Several years ago, Prof. Lisa Bingham did a series of studies on the sort of hearing people get under pre-dispute arbitration agreements in employment. What she found was a system that was biased toward employers as a result of the "repeat player effect".
The advantages of arbitration for corporations can increase over time, as companies become more skillful at navigating the procedure. Lisa Bingham, a professor of public policy at Indiana University, documented the phenomenon in employment-related arbitrations. An employee's likelihood of winning a claim decreased when dealing with a company that repeatedly went through the process with other employees, the study found. Unlike individual employees, Ms. Bingham said, companies frequently compile data on arbitration decisions that may allow them to develop strategies for subsequent cases.
More on the repeat player effect:
[A]rbitration companies and arbitrators have an inherent financial interest to rule in favor of defendant corporations (a problem directly related to the weak conflict of interest standards mentioned above). Because these large corporations are more likely than any individual consumer to require arbitration in future matters, they are considered “repeat-players” that arbitration companies should appease to secure future business. This severely undermines the notion that arbitration is a neutral process. Arbitration companies face the threat of losing profits or being dropped as a corporate client’s designated arbitrator if they too frequently rule for consumers and against these repeat-players.
Congress Takes Action to Protect Our Rights
On October 25, 2007, the House Judiciary Committee held hearings to put a stop to this looting of our rights to redress. The resulting legislation is H.R. 3010/S. 1782 - The Arbitration Fairness Act of 2007.
The American Trial Lawyers Association explains why this legislation is needed.
Buried in the fine print of a credit card billing insert, employee handbook, health insurance plan, or franchise agreement, binding mandatory arbitration clauses eliminate a consumer’s access to the courts, and force them into a costly private legal system that favors corporations.
Since these binding mandatory arbitration clauses are presented on a take-it-or-leave-it basis, the consumer has no choice but to waive their rights. Unfortunately, these clauses are achieving their intended purpose — undermining consumer protections, civil rights, and other laws that level the playing field between corporations and individuals.
The ATLA explains how we are harmed by what seems on its face like a fair and good way to resolve a dispute:
Arbitration can be a valid and effective method of dispute resolution when both parties voluntarily agree to arbitrate, but when it is used by a corporation to limit the legal rights of an individual in a non-negotiable contract, it becomes an abusive weapon. With the help of binding mandatory arbitration clauses, corporations are able to create a one-sided process that leaves the consumer with big arbitration fees and little chance of recovery.
* One-sided Requirements. Most binding mandatory arbitration clauses only require the consumer to waive their rights to the civil justice system, while allowing the corporation to sue in court if they so choose.
* High Costs. Consumers must pay steep filing fees just to initiate a case—seldom less than $750 – and pay their share of the arbitrator’s hourly charges, which are routinely $400 or more per hour. All these fees must be deposited in advance, and almost always amount to thousands of dollars. In addition, arbitration clauses often allow the corporation to choose the location, regardless of how inconvenient or costly travel will be for the consumer.
* Biased Decision-makers. Since only businesses are repeat users of an arbitrator, there is a disincentive for an arbitrator to rule in favor of a consumer if he expects further retentions. A September 2007 Public Citizen report on credit card arbitration analyzed more than 19,000 credit card arbitration cases in California, and found that the arbitrators ruled in favor of the corporation almost 95% of the time.
* Weak Civil Justice Safeguards. Binding mandatory arbitration clauses often severely restrict the individual’s ability to argue their side of the case. For example, it severely restricts the individual’s ability to obtain necessary evidence – which they would be allowed to obtain in court. Moreover, it is nearly impossible to appeal adverse decisions by arbitrators. A decision may be overturned only if there is fraud or “manifest disregard of the law.”
* Secret Backroom Proceedings. While proceedings and records of the courts are open to the public, most arbitration clauses require that proceedings be kept confidential, even if the case raises important public policy issues. As a result, only the corporation can track past decisions and know which arbitrators have ruled for them.
One problem with signing a pre-dispute agreement is that you cannot predict what will happen, so you cannot make the best choice for how to resolve disputes.
The new law would restore the original intent of the law Congress passed. It would permit agreeing to go to arbitration after a dispute has arisen. It would require that when you waive your rights to trial, that waiver is truly voluntary and not coerced.
You can find the text of the bill here.
And here is the excerpt that includes Congress' findings.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The Federal Arbitration Act (now enacted as chapter 1 of title 9 of the United States Code) was intended to apply to disputes between commercial entities of generally similar sophistication and bargaining power.
(2) A series of United States Supreme Court decisions have changed the meaning of the Act so that it now extends to disputes between parties of greatly disparate economic power, such as consumer disputes and employment disputes. As a result, a large and rapidly growing number of corporations are requiring millions of consumers and employees to give up their right to have disputes resolved by a judge or jury, and instead submit their claims to binding arbitration.
(3) Most consumers and employees have little or no meaningful option whether to submit their claims to arbitration. Few people realize, or understand the importance of the deliberately fine print that strips them of rights; and because entire industries are adopting these clauses, people increasingly have no choice but to accept them. They must often give up their rights as a condition of having a job, getting necessary medical care, buying a car, opening a bank account, getting a credit card, and the like. Often times, they are not even aware that they have given up their rights.
(4) Private arbitration companies are sometimes under great pressure to devise systems that favor the corporate repeat players who decide whether those companies will receive their lucrative business.
(5) Mandatory arbitration undermines the development of public law for civil rights and consumer rights, because there is no meaningful judicial review of arbitrators' decisions. With the knowledge that their rulings will not be seriously examined by a court applying current law, arbitrators enjoy near complete freedom to ignore the law and even their own rules.
(6) Mandatory arbitration is a poor system for protecting civil rights and consumer rights because it is not transparent. While the American civil justice system features publicly accountable decision makers who generally issue written decisions that are widely available to the public, arbitration offers none of these features.
(7) Many corporations add to their arbitration clauses unfair provisions that deliberately tilt the systems against individuals, including provisions that strip individuals of substantive statutory rights, ban class actions, and force people to arbitrate their claims hundreds of miles from their homes. While some courts have been protective of individuals, too many courts have upheld even egregiously unfair mandatory arbitration clauses in deference to a supposed Federal policy favoring arbitration over the constitutional rights of individuals.
More on the latest hearing here.
No dispute about it! It's time for fairness and a level playing field. It's time to make our rights real rights.
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