Many people have no idea that they are signing away their rights to bring a case in court. Arbitration is a legal proceeding that has had little time in the spotlight, and usually only lawyers or those who are regularly engaged in high-level business deals use arbitration on a regular basis. However, almost everyone in the United States has “agreed” to arbitration clauses.

In the past decade, arbitration clauses have started popping up everywhere. In nearly every aspect of their businesses, corporations have created arbitration agreements that bind employees and consumers. Sometimes a forced arbitration clause is on the seventh page of an employment contract, or in the fine print of “Terms of Service.” Sometimes corporations have stated that by opening the outer packaging of a product, you have agreed to arbitration.

According to the American Association for Justice, 55% of the American workforce is subject to mandatory binding arbitration with their employers, 75%  of major consumer transactions are subject to mandatory binding arbitration and 93% of checking accounts have a forced arbitration clause attached.

Perez “agreed” to arbitration as part of the on-boarding process with her former employer, Cigna.

“When I was offered the position . . . they sent me an email of the onboarding packet and it’s a bunch of links which doesn’t allow you to go back, so once you click on next that’s it . . . Everything was just, you know, picking your medical benefits, requiring the I9, the normal stuff, but then there comes that little, tiny section with the tiny, tiny, little words. It says if you have a dispute, you have to go into forced arbitration, and that was it. Check here, click ‘next.’”

Perez, excited to join Cigna as a full-time worker after months as a contractor, clicked “next.” “I didn’t know what that meant, and I’m just like, I’m excited I got a job!” Perez had had positive experiences as a contractor at Cigna and was excited to become a full-time employee with benefits. “You don’t ever accept the position ever thinking that you’re going to use that or even know what that means. You don’t think that a corporation is gonna do wrong, you know, so I didn’t even pay attention to it because I didn’t a didn’t know what it was.”

Many people don’t know what an arbitration is when they sign a contract agreeing to arbitration.
Credit: Cytonn Photography – Unsplash

Despite few people knowing that they’ve agreed to arbitration and fewer understanding what arbitration is, these “agreements” have serious consequences that make it very hard for a person to bring suit against a company. 

Perez found out firsthand how difficult the arbitration process can be. After learning she was being fired with no evidence of poor performance, she did what many people would do: she went to her Human Resources representative, who told her to go to arbitration. “I thought arbitration . . . was another step of human resources like okay, this level didn’t work, so I am gonna go above that. It wasn’t until I found out after I paid to initiate . . . what the arbitration process was.” She found herself with stacks of documents and no idea what to do next.

“I thought arbitration . . . was another step of human resources like okay, this level didn’t work, so I am gonna go above that. It wasn’t until I found out after I paid to initiate . . . what the arbitration process was.”

“I wanted a lawyer; I really wanted a lawyer,” she says, running her fingers through her hair. There’s no right to an attorney in arbitration, or civil litigation. Many attorneys that take on civil rights cases do so on contingency, only getting paid after a settlement is made in their client’s favor. This means to stay afloat, attorneys weigh the strength of a person’s case against the amount of time and effort the lawyers would need to invest.

Despite Perez’s strong case, she couldn’t convince a lawyer to guide her through the arbitration process. Instead, she recalls, “once they saw the actual arbitration contract, they said ‘no . . . you’re okay, you’re good to go. It’s informal; it’s quick . . . you don’t really need counsel for this.’” 

Lawyers who are worried about their bottom line rarely want to represent individuals against big companies in arbitration, for good reason. While arbitration outcomes are not disclosed, arbitration providers AAA and JAMS, two of the largest providers in the country, provide basic information about claims that have been both filed and settled within a five-year period. These statistics provide few details about proceedings, but even so, the statistics for individuals like Perez going up against corporations paint a bleak picture.

In consumer complaints, nearly 1000 consumers went up against AT&T, claiming over $440 million. Of those consumers, only 17 won any money at all through the process, totaling only $376,251 of the original $440 million. In other sectors, the statistics are even more bleak: in forced employment arbitrations like Perez’s, only 2.2% of employees received any monetary awards in a five-year period, and the recovery was less than 0.2% of the money originally claimed.  

There are a few reasons why the statistics for plaintiffs are so bad in arbitration. One possibility is that the mediators and arbitrators are not subject to any type of review. There are no appeals processes for arbitrations—that means if there are any errors in the process of a particular arbitration, the errors stand. Another wrinkle is that the arbitrators themselves are not appointed and approved by committee, as federal judges are, nor are they elected, as some state judges are. Arbitrators are merely hired by private companies, with no government guiderails. While many mediators are retired judges, there are many former corporate lawyers among the AAA and JAMS mediators as well. 

This lack of review should be a cause for concern—without any review, mediators are under no obligation to follow ethics rules, or give proper attention to the issues before them. This means that in many instances, arbitrators who have spent years defending corporations and even writing corporate arbitration clauses are the “neutral” parties who decide whether the individual or the corporation should prevail.

Even if the mediators follow the highest standards in all arbitrations, people make mistakes. With no appellate review, people may go through a long, expensive process without any hope of correcting errors.

Believing the advice of the lawyer she consulted, Perez decided to initiate the “quick” and “informal” arbitration. She showed up to arbitration alone, while Cigna brought several lawyers. “When I first spoke to one of [Cigna’s counsels], he spoke to me in a manner that was just like, whoa, where are you coming from? This is so brand new to me can you just [stop] . . . yelling and being rude and just being condescending.” She confides, “I didn’t like that, I didn’t feel safe, I didn’t feel comfortable.” 

If this story seems familiar, that’s because it is. In the past five to seven years, there have been many headlines detailing abuses that people have suffered as a result of forced arbitration. Disappointingly but unsurprisingly, forced arbitration has been used to silence claims and enable discrimination in the workplace.

During the #MeToo movement, women including former Fox News anchor Gretchen Carlson came forward, breaking their silence and risking their settlements to talk about the sexual harassment they faced in the workplace.

Public outcry began as repeat offenders such as Sterling Jewelers were revealed to have been able to continue their bad behavior and subject more victims, shielded from any criminal charges or public embarrassment because of the many non-disclosure agreements the company had written in to their forced arbitration processes.

Credit:Photo by Elyssa Fahndrich on Unsplash

Recently, arbitration has made headlines in the sports world with a controversy arising out of the hiring practices of the New York Giants. Brian Flores, hoping to hold the NFL accountable for racism in hiring, may be forced arbitration.

“Forced arbitration is the crux of why all forms of discrimination are so prevalent in our country”

Flores has become a strong critic of forced arbitration and of how forced arbitration targets minority communities: “Forced arbitration is the crux of why all forms of discrimination are so prevalent in our country — systemic racism and discrimination. . . . Forced arbitration allows an employer to hide behind secret and confidential proceedings. The employer avoids scrutiny and publicity accountability. With this system in place. . . . how can we believe real justice and real change can occur?”

Because arbitration is conducted in secret and without a jury, the whole process relies on the legitimacy of the arbitrator. Selecting the arbitrator, or the “neutral” as they are referred to on the JAMS website, is one of the first steps in the arbitration process.

In both JAMS and AAA proceedings, each party in an arbitration is allowed to “strike” a certain number of potential arbitrators for any reason. Arbitrators have resumes and are supposed to disclose any relationships to the parties that would “give rise to justifiable doubt as to the Arbitrator’s impartiality,” according to JAMS rules. According to the AAA rules, “[a]ny arbitrator shall be impartial and independent and shall perform his or her duties carefully and in good faith” or be disqualified. Yet, without any oversight or judicial review, the rules of arbitration sites are cold comfort for those who must rely on these arbitrators for justice.

When Perez was given a list of arbitrators to choose from, she closely reviewed the resumes and disclosures that the arbitrators provided. She struck down one arbitrator, and Cigna struck down another. This selection process took months. “We started this process in August,” she recalls, “now it’s October. I want to get my claim going, I want to get my job back. Why is this taking so long if it’s supposed to be quick?”

When they finally agreed on an arbitrator, she felt confident. “This arbitrator I chose only because he left the corporation that he was working for to now work with his wife and deal with employees . . . so I felt like, oh, he can understand me.”

Cigna also agreed to this third choice. “When he submitted his oath everything was a ‘no’ . . . he didn’t know anyone, no relation.” A few weeks later he submitted his amended oath and resume, which she again reviewed. The next step was to submit a list of any interactions or relationships that may show bias. The arbitrator submitted a list, confirming that he knew no one involved in the arbitration. If arbitration had to happen, and no lawyer would represent her, at least Perez had thought she had found a fair arbitrator. “I trusted the process . . . . I figured oh, okay, they are there to make sure that everything is going smooth, like the big brother.”

Quickly, she found that her “big brother” wasn’t there to ensure a fair process. “That arbitrator ended up changing . . . the format from informal to now formal.” She says, “he told me, ‘go to the Florida Middle District website and you’ll find the rules for Federal Rules of Civil Procedure.’ And I had to follow that.”

Despite knowing that Perez was representing herself, that the arbitration was presented as informal, the arbitrator changed the rules on Perez. She remembers “by then, it’s already too late, you know, it’s—arbitration has already been initiated. I had to write motions now.”

Perez found herself navigating the legal field without counsel, going to law libraries and asking her husband, who had taken a few paralegal studies courses, for help. “I just wanted my job back. At the same time, I was looking for work and trying to raise a family. And my husband, who was still working for the company, for the same department, was now being retaliated against.”

Drowning in paperwork, Perez was representing herself against seasoned lawyers, trying to learn on the job the complex legal regimes of discovery, evidence, and trial advocacy. 

“By then, it’s already too late, you know, it’s—arbitration has already been initiated”

Perez persevered, working day and night on her case. “I had to do a summary judgment in one week.” She recalls, she “didn’t even know this ‘summary judgement’ can even be used in arbitration, but what do I know? They created the entire process. They created the law, the rules . . . here I am just trusting everything, hoping that AAA would catch something.” As she was getting together a right-to-sue letter, she learned she had lost.

Legal Research is a difficult skill that can take years to master. Unfortunately, Perez was forced to learn this and many other legal regimes on her own.
Credit: Photo by Aleix Ventayol, Unsplash

The week she received the decision, her husband found a picture of the arbitrator at a birthday party, hugging and smiling, with Cigna’s lead counsel. The arbitrator had lied in his disclosure statements. “That list of arbitrators are the ‘repeat players’ so everything is stacked up against you,” she says. “They give you this false hope that justice will be sought bit it’s not.”

“Knowing that I had no law experience, nothing, makes it even worse,” she says. “They put me and my family through this treachery.” Looking back on her time in arbitration, she says “The best way I can…describe it is killer whales,” shaking her head. “When they catch their prey, they play with it. They bounce it around, they toss it in the air, and then they go for the kill. That’s how I felt they were playing with me the entire time.” 

Corporations understandably want to continue to benefit from results that minimize their liability. However, arbitration is a relatively new approach to reducing corporate liability. The recent increase in arbitration is largely due to the Supreme Court’s radical re-interpretation of a law from the 1920s. 

The Federal Arbitration Act, passed in 1925 and championed by then Secretary of Commerce Herbert Hoover, forced courts to stay litigation that when a dispute involves a contract with a written arbitration clause. However, the original scope of the law was very narrow. As written, the Federal Arbitration Act (FAA) could only be used to enforce arbitration in controversies involving federal law and interstate commerce, and could only be between parties of relatively co-equal bargaining power.

Essentially, Congress intended that the FAA only applied to contracts that involved negotiation, and did not enforce arbitration in “contracts of adhesion”—contracts that would force a weaker party to sign or walk away, such as contracts that involve a person buying insurance, utilities, automobiles, or phone coverage.  This  ideal of forced arbitration being limited to equal players was upheld in a 1953 Supreme Court case, Wilko v. Swan. Because of this, the law was primarily applied to enforce arbitration arising out of trade disputes between businesses until the 1980s.

However, starting in the with the 1983 case Moses H. Cone Memorial Hospital. v. Mercury Construction Corporation, the Supreme Court decided a contract that mentions an arbitration clause should favor forced arbitration “notwithstanding any state substantive or procedural policies to the contrary,” expanding arbitration to override state law.

Several cases to expand arbitration followed, including Mitsubishi Motors v. Soler Chrysler-Plymouth, the 1985 case that stated that arbitration can be forced on a party even when the issue isn’t about something relating to the signed contract itself, but any statutory law. This was a huge expansion.

A string of cases followed holding that arbitration could be forced on a party even when the allegations dealt with violation of antitrust statutes or age discrimination. With these cases, the U.S. Supreme Court made clear that forced arbitration wasn’t just about issues relating to the cost of a product or the benefits an employee has contracted to receive—this involved all substantive law. People who wanted to vindicate their rights in cases arising out of discrimination, the Fair Labor Standards Act, and harassment were systematically barred from court.

The newer, broader reading of this law has led to company abuse on a massive scale—“repeat players” with in-house lawyers, such as large corporations, force employees with no legal background to sign employment contracts that include these arbitration clauses. The result is large, powerful employers able to hire a workforce unprotected by statutory and Constitutional law. 

The result is large, powerful employers able to hire a workforce unprotected by statutory and Constitutional law.

There is a strong tool the courts have in place to give individuals an opportunity to fight against corporations who commit broad harms—the class action. The concept of class action has its origin in English common law “group litigation,” which has been around since the Middle Ages. The United States passed a law in 1938, creating “Rule 23,” which officially codified group litigation and allowed for class actions if the “class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” 

Class actions are often brought to enable large groups of people, such as consumers or employees, who may have been harmed, to seek justice against a single entity, such as a corporation, that may have created that harm. Class actions are necessary because a person may not be able to easily bring a case individually or may recover too little to make a case worth bringing.

Congress created class actions in part to ensure that corporations can be held responsible for small-scale financial harms. But Congress also created Rule 23 for efficiency—the process makes it possible to hold a bad actor responsible in a single trial, creating a relatively simple process that can result in one, large-scale recovery, which is later distributed across many plaintiffs. 

Corporations in particular are the target of these types of cases—and class actions may be the only way corporations will be held accountable for these smaller recovery cases of misconduct such as consumer defects or wage-and-hour theft.

In the wake of the many Supreme Court decisions that expanded the scope of the FAA, corporate lawyers began to wonder if they could shield their companies from liability by creating class action waivers in contracts that also forced arbitration. Alan Kaplinsky, former partner at corporate law firm Ballard Spahr and long-time advocate of forced arbitration, shared on his podcast “Consumer Finance Monitor,” “about twenty-five years ago…there was practically no law dealing with the issue of whether language in an arbitration provision barring a consumer from participating in a class action . . . whether that would hold up in court.”

He and other corporate defense lawyers decided to give it a try, however, and soon the conservative Supreme Court had two new five-four pro-arbitration decisions on the books: in 2011, AT&T Mobility LLC v. Concepcion and in 2013, American Express Co. v. Italian Colors Rest.. These decisions, written by Justice Scalia, allowed class action waivers in contracts to be enforced against individuals. Instead of becoming members of a class in a class action, people had to arbitrate alone, even when the recovery would be too small to be worth litigating individually. These rulings left no avenue for those who had been wronged to meaningfully recover. 

Instead of becoming members of a class in a class action, people had to arbitrate alone, even when the recovery would be too small to be worth litigating individually.

The decisions left wide areas of the law open for corporations to violate without fear of meaningful legal repercussions. Kaplinksy recalls, we “started celebrating; we had wild parties for, you know, several weeks.” Class actions seemed to be a thing of the past for any corporation with enough money to have a lawyer update their contracts.

Despite part of the purpose of class actions being to prevent the exact type of small claim abuse described in Italian Colors, class actions could now be prevented by an additional line of fine print. Corporate lawyers had won a huge victory for corporate America.

As a result of the sweeping expansion of the Forced Arbitration Act, class action waivers and forced arbitration clauses flourished in all areas of corporate law. Forced arbitration has become so pervasive that law review articles are bombastically calling it an “epidemic” and “the end of the law.”

However, consumer, employment, and civil rights lawyers have started to fight back. In arbitration, organizing, and policy creation, lawyers and plaintiffs alike have started to draw lines in the sand. Remington Gregg, policy expert and former Counsel for Civil Justice and Consumer Rights at Public Citizen, a consumer advocacy non-profit, believes “showing how forced arbitration clauses have been used to continue systemic wrong doings” has created “momentum . . . based in large part on the lack of accountability” on the part of corporations, particularly on issues of discrimination. 

Plaintiffs’ lawyers have decided to weaponize the process of arbitration by taking the class action model of amassing large groups of plaintiffs and bringing it into the world of arbitration. In “mass arbitrations” plaintiffs bring hundreds or even thousands of individual arbitrations that would traditionally be a single class-action in the courts. This has several advantages. 

First, much of the upfront costs for arbitration are paid by the defendants. By bringing hundreds or thousands of arbitration claims, suddenly a legal scheme originally intended to save a company money can become more costly than going to court, particularly in consumer or small dollar wage-claim cases. Faced with exorbitant fees, corporations can be incentivized into agreeing to a good settlement for all plaintiffs, much like a settlement of a class action case.

However, some corporations would rather fight their own arbitration clauses than pay such settlements, crying foul. Defense lawyers, including Kaplinky, believe holding corporations to the contracts they crafted is unfair. When he was first faced with a mass arbitration notice, he says, “I felt a little bit like it was a holdup—that my client didn’t really have much of a choice.”

Matt Webb, Senior Vice President of Legal Reform Policy for the U.S. Chamber of Commerce, a business-focused lobbyist group, worries in instances of mass arbitration, “it’s less about the facts of the case and what was done or not done . . . versus just trying to use the sheer size or number of claims as a bludgeon to effectively force a settlement.” 

These critiques primarily address concerns surrounding consumer and other small claims and fall short of addressing mass arbitrations that involve larger claims, such as employment discrimination. Additionally, if corporations truly have done nothing wrong, plaintiffs will lose in arbitration. Kaplinksy believes “plaintiffs’ lawyers are no more interested in prosecuting thousands of individual arbitrations than the company is in defending them,” and argues that calling the bluff of plaintiffs’ lawyers who bring a mass arbitration would be an effective tactic for corporations to avoid settling in where no wrong-doing has occurred.

Despite the detractors, those who oppose forced arbitration see this approach as an effective strategy. “I would say that [mass arbitration] has become a device . . . that consumers and workers have used to ensure that the system works for them,” says Gregg. Intuit and Postmates, both of which have class action waivers in their arbitration clauses, have crawled back to court, asking for class action settlements after being overwhelmed by thousands of individual arbitration fees.

“The only thing they’ve got left is the right to arbitrate. And now you want to take that away from them.”

The courts have not been sympathetic to these corporate cries, instead forcing companies to stay in arbitration or settle. “Faced with having to actually honor its side of the bargain, [DoorDash] now blanches at the cost of the filing fees it agreed to pay in the arbitration clause.” said U.S. District Judge Alsup of San Francisco to a plea by DoorDash, who was faced with over 5,000 cases to arbitrate and $12 million in arbitration fees. Referring to the plaintiffs, J. Alsup wrote, “The only thing they’ve got left is the right to arbitrate. And now you want to take that away from them.”

DoorDash forced its contractors to sign away their right to class actions, but once faced with mass arbitration, the company tried to bring them back to court.
Credit: Griffin Wooldridge – Unsplash

Another reason why mass arbitration is attractive is that the work that goes into building a case becomes more efficient for a plaintiffs’ lawyer the more cases they have. If the same corporate misconduct affects all the people the lawyers represent, the amount of work become redundant, and the risks of the financial cost to the firm goes down as the amount of work for each new arbitration decreases.

This doesn’t cure issues with forced arbitration, however. Lawyers who bring these arbitrations face down big law, corporate lawyers who defend the same corporate misconduct in arbitration after arbitration. And defendants will fight tooth and nail to prevent any positive outcome.

Zachary Rubin, a plaintiffs’ lawyer who works on mass actions at employment law firm Lichten &Liss-Riordan, P.C., says that while  mass arbitration is a way forward, it is also an indictment of the positives that arbitration is supposed to provide: “When you go to court, we get a lot of companies talking about, ‘well arbitration is more efficient’ . . . . The reason we know that is complete nonsense is because in many cases a class action would be more efficient.”

Each individual arbitration in a mass arbitration is still a single person going through all the arbitration procedures. This means that similar cases that have what lawyers refer to as “a common nucleus of facts” are arbitrated over and over. Rubin relates his criticism back to the class action law: “[I]f you look at the Rule 23(b)(3) factor of superiority, and you look at the case law on, you know, whether the class action will achieve economies of time, effort, and expense . . . . There’s clear tension . . . all the case law that says class actions are more superior.”

The reason we know that is complete nonsense is because in many cases a class action would be more efficient.

The repeated claims in a mass action also provide avenues for corporations who want to use every opportunity to draw out the process and make the individual claimant, and their lawyers (if they have any), miserable. Even though plaintiffs’ firms reduce some time on each case by following the same facts, defense lawyers use tactics to repeatedly throw up barriers. “Should it really be that you can have dozens or even hundreds of common claims and force all those individuals, perhaps represented by the same law firm…[to] go through discovery on the same issue again and again and again and again?” Says Rubin, “That just would never happen in federal court because the magistrate or the federal district court judge would say, you know, ‘That’s crazy.’”

“That just would never happen in federal court because the magistrate or the federal district court judge would say, you know, ‘That’s crazy.’”

While these tactics prolong the process, they rarely result in a different outcome, says Rubin. “We literally would win certain legal issues . . . procedural issues that were important again and again . . . but they still made us file briefs in the fifty-first arbitration even though we won the issue fifty, fifty-one times—because [the defense lawyers’] strategy was just to make the process as burdensome as possible.”

Importantly, while mass arbitration has a lot of appeal for plaintiffs’ lawyers, it does little to shield the individual who brings an arbitration action from the hostile environment of a secret proceeding where the company has already dictated the rules. And while plaintiffs’ lawyers may be able to save time in this model, many believe the true purpose of arbitration is to make the client drop the claims. After all, Rubin explains, the defendants are often being supported by a lawyer who will do everything they can to “put [plaintiffs] through the wringer” and do “full-day depos[itions]…seemingly because they want to make the experience miserable for the workers.” Proponents of forced arbitration argue that arbitration is less adversary than trail, but with tactics such as these, it can be just as hard, if not harder, to go through the arbitration process as going to court. 

Corporations, their defenders, and arbitration providers are already trying to insulate corporations from this new tactic. On February 28, 2022, dating app Hinge updated its terms of service to include mass arbitration provisions, which trigger when more than twenty-five “similar demands” are asserted, and if more than 30 similar claims are filed, fees are delayed until after a set of proceedings.

In November 2020, AAA updated its fees to implement a sliding scale for “multiple consumer cases.” Though on the surface it might seem strange that an arbitration company that professes to be neutral provide fee scales that make it easier for corporations, it makes sense from both a marketing and a self-preservation tactic: if you can prevent a corporation from feeling overwhelmed by fees, you can still get their money for a slightly lower price. 

For critics of arbitration, the lessons of mass arbitration are clear. “There’s some examples of . . . companies ending the use of forced arbitration because of mass arbitration,” says Gregg. But, Gregg continues, “the ultimate takeaway for me is a confirmation that forced arbitration is a claim suppressor. It’s not something that [corporations] want because they enjoy arbitration. They use it because so few people often go into it, and when they start to use it [corporations] then try to rewrite those rules.”

“The ultimate takeaway for me is a confirmation that forced arbitration is a claim suppressor.”

Organizers in privileged positions can also make a difference in the world of corporate power. In 2019, a student group at Harvard Law School learned students were being asked to sign arbitration agreements for their summer internships. Instead of signing these agreements, they organized.

The People’s Parity Project reached out to other groups including LGBTQ+ advocacy group, Lambda, to form a movement. Quickly, HLS students made it clear that they would not work for high-end, well-known law firms that required students to sign arbitration agreements. “We actually organized a leafleting campaign outside of Venable’s office in D.C. when they were having a recruiting event for rising 2Ls,” Beth Feldstein, a field organizer for People’s Parity Project, told the Harvard Law Record. Their work and partnership spread to other law schools including Yale, Stanford, and NYU. Then, forty law school deans asked firms to disclose whether they require mandatory arbitration agreements for their employees.

In part because law is a business that equates prep school cache with advertising, students won. Organizers got top law firms across the country including Kirkland & Ellis, Sidley Austin, and Gibson, Dunn & Crutcher to stop requiring arbitration agreements, not only of their interns and lawyers, but their staff, including janitors and cafeteria workers, who are often left out of such protections. 

While this story proves that organizing can be effective in preventing further proliferation of forced arbitration agreements, it may be hard to replicate. Students at top law schools and employees at Google may feel able to protest arbitration, but most consumers and the vast majority of the non-union workforce will not be able to turn down such agreements for healthcare, phone service, or jobs.

“If forced arbitration is a problem created by the courts, it can only be fixed by Congress,” says a representative of an anti-forced arbitration think tank. For the past 30 years, bills have been introduced and re-introduced, sometimes passing in the House but always failing in the Senate, primarily down party lines, with Democrats in support of limiting the scope of the FAA, and Republicans against.

“If forced arbitration is a problem created by the courts, it can only be fixed by Congress”

Champions of mandatory arbitration say that arbitration is “faster, less costly, and more efficient than litigation” and that companies use arbitration clauses because of these benefits. These arguments are largely based on data collected directly from AAA and JAMS, who only publish data on arbitrations that are already concluded.

The statistics that are used by the U.S. Chamber of Commerce, for example, come from two studies: one study from 2019 that only detailed 10,000 employment-arbitration cases from JAMS and AAA between 2014 and 2018, and an updated study from March of 2022, which adds additional data from the arbitration companies up to 2021. Webb says, “[when] we look at the data basically, consumers, employees tend to win more frequently . . . get more in compensation, and also get it faster than going through more traditional court-based litigation.”

Both Chamber’s studies attempt to compare arbitration statistics against litigation statistics from the same years in the same areas of law. For example, the studies compare consumer arbitration versus consumer litigation. Other proponents of forced arbitration point to a 2015 study conducted by the Consumer Finance Protection Bureau (CFPB), which also used data provided by arbitration providers AAA and JAMS.

Because so much of the policy arguments rely on statistics that are only accessible by permission from the arbitration companies, AAA and JAMS have high incentives to massage the data they provide about their services. It turns out, AAA was doing just that—the data they provided to the CFPB for their 2015 study and many others did not actually reflect the timeline or recovery of the arbitrations the company conducted. As of fall 2019, AAA deleted data every quarter by filed date, even though they only published closed claims. This means that the longer a case takes in arbitration, the quicker AAA deletes it from its statistics. 

Yale Law School began keeping archives of AAA’s quarterly consumer statistics, and the American Association for Justice used this archive to start reviewing the quarterly data over time. It turned out, that a case that was filed in August 2009 and resolved in the March of 2014 only appeared for a single quarter in AAA’s database—essentially hiding the case in their previous data publications. Thousands more were quickly discovered in Yale’s database that were scrubbed from AAA’s statistics. The American Association for Justice posits it’s likely that any cases that last more than five years are conveniently scrubbed from AAA’s database in this way.

According to one anti-arbitration policy leader, AAA recently stopped deleting their data this way, but many law review articles continue to cite the flawed CFPB study, either unknowingly or unwilling to acknowledge AAA’s manipulation. The result is that there are two different data sets that policy leaders can pick and choose from, based on whether they want accuracy or arbitration-friendly outcomes.

The Chamber and other think tanks that want to protect forced arbitration continue to site these flawed studies on a regular basis. However, even in their own studies, the Chamber’s promises of better outcomes for plaintiffs’ are proven false: the March 2022 study shows that employees are half as likely to receive positive outcomes in arbitration as in litigation. Webb, when asked about the discrepancies between the Yale Law School archive and the numbers in the Chamber’s studies, said he was unaware of Yale’s database.

“If you look at the state of the country, there’s a huge divide between Democrats and Republicans, but one thing that’s one thing that is starting to bridge the gap a little is just real anger at corporate America.”

Even with policy wonks using statistics to battle each other to a standstill, progress is being made. The many high profile instances women bravely breaking their non-disclosure agreements as part of the #MeToo movement revealed the problems of forced arbitration in the context of sexual harassment. The gross misconduct of Fox News, Sterling Jewelers and others have helped forced arbitration become less of a partisan issue. “People are kind of tired,” says Gregg, “If you look at the state of the country, there’s a huge divide between Democrats and Republicans, but one thing that’s one thing that is starting to bridge the gap a little is just real anger at corporate America.”

Republican Senator Lindsey Graham, at the Judiciary Committee Arbitration in America hearing in April, 2019, “My point is, being a lawyer for most of my adult life, I like it. Arbitration has a place in society,” he said, but with a caveat: “I wanna be pro-business, but everything good for business sometimes is maybe not the best answer for society.” Democratic Sen. Blumenthal, at the same committee hearing, reiterated a long-standing view of the Democratic Party: “In America, everybody deserves a day in court. . . . Forced arbitration is the evil that deprives Americans of their day in court.”

“When it comes to sexual harassment and assault, forced arbitration shielded perpetrators, silenced survivors, enabled employers to sweep episodes of sexual assault harassment under the rug and it kept survivors from knowing if others have experienced the same thing in the same workplace, at the hands of the same person.”

The media coverage, activism, and legislative response lead to #MeToo legislation co-sponsored by R-Sen. Lindsey Graham and D-Sen. Kristen Gillibrand. Finally, the Senate was ready to limit forced arbitration, and passed the bill. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASA) was signed into law by President Biden on March 3, 2022. “When it comes to sexual harassment and assault, forced arbitration shielded perpetrators, silenced survivors, enabled employers to sweep episodes of sexual assault harassment under the rug and it kept survivors from knowing if others have experienced the same thing in the same workplace, at the hands of the same person,” President Biden said before signing the bill. 

Dubbed a “first step in the right direction” by anti-forced arbitration advocates, this bill became the first piece of legislation limiting the reach of forced arbitration passed by the Senate. “[We are] immensely grateful to Gretchen Carlson and others who detailed their stories of sexual harassment and abuse in the workplace,” said an advocate for limiting forced arbitration.

For plaintiffs like Perez and Flores, however, justice is still a dream deferred. The new law doesn’t cover racial, sex, or age discrimination—only instances where a person was sexually harassed or assaulted. However, another bill has been repeatedly proposed and passed in the House that would enable broader protections. The Forced Arbitration Injustice Repeal Act, or FAIR Act, if passed, would prevent corporations from forcing individuals and small businesses into arbitration for “future employment, consumer, or civil rights dispute[s],” and would prohibit class action waivers in those same disputes. This would enable class actions when a company broadly discriminates against the Title VII protected categories of race, color, religion, sex, or national origin, or violates any employment or consumer laws.

The FAIR Act was initially proposed in 2009, but versions of the bill have been proposed in 2011, 2013, 2015 and 2019. Democratic Representative Henry “Hank” Johnson Jr. of Georgia, who has sponsored the bill many times, sponsored it again in February 2021, and that bill passed the House in March of this year. It has been referred to the Committee on the Judiciary.

It seems strange that the FAIR Act, which would have achieved the same relief for victims of sexual harassment and assault as the new law, has had so much trouble getting through Congress. The current iteration, S.505, is still waiting on a vote in the Senate and has no Republican sponsors. “Every argument for that bill is an argument for this bill,” said D-Rep. Jerry Nadler of New York. Sen. Graham, who was the Republican sponsor for EFASA, was unavailable for comment. 

“Every argument for that bill is an argument for this bill”

Gregg, who worked in the Obama White House before becoming a lobbyist, is optimistic that the FAIR Act has a future. “I don’t think we’re gonna stop at just sexual harassment and sexual assault; . . . other sorts of discrimination will come into play soon.” When asked why the FAIR Act hasn’t passed, Gregg responded, “The United States Senate is all about incremental change, and they don’t do a lot of broad sweeping changes. And that’s not something I necessarily agree with.” But, Gregg adds, the passage of the new law will allow lawmakers to “assess the claim that the sky will fall if you aren’t able to bring claims in forced arbitration.” He postulates that “we’ll see the . . . the engine of justice humming along. . . . It will then assuage some people.” 

When Perez lost her arbitration, she did finally have the opportunity to go to court. She hoped that the evident partiality of the arbitrator would be enable the ruling to be vacated by a judge. But the judge sided with Cigna without a hearing. While going through this process, Cigna fired Perez’s husband after he hired a service processor to serve Cigna on her behalf. This retaliatory behavior is illegal, but unfortunately, her husband was also bound by arbitration. 

“We were thriving, and because of forced arbitration—it left us surviving.” When asked how she is, Perez admits, “I’m not gonna lie I still have that little fear, you know . . . I don’t know if it’s trauma. . . . I’m not sure what to call it. . . . I’m always looking over my shoulder.”

The new home the couple bought after getting their jobs at Cigna is now in foreclosure. Perez now reads all the fine print and actively opts out of arbitration agreements. “I am now mindful. And I hate that I have to be mindful, because I just want to be normal.” Ensuring she doesn’t agree to arbitration involves a lot of navigating contracts and writing opt-out letters. She says, “It is constantly researching . . . you know it’s tiring, I’m tired,” and confides, “my kids think I’m crazy. Like, ‘mom, it’s cash app’ . . . you don’t understand, forced arbitration, it ruined me.”

“you don’t understand, forced arbitration, it ruined me.”

Going from a two-income household to double unemployment was a struggle, but Perez says, “We’re slowly getting back on our feet.” Despite the amount of work it takes to avoid arbitration contracts, Perez has found avenues that provide better working conditions for her and her family. “My job, we have a union, so I am learning what unions do.” Unions have a completely different approach to arbitration and can bar employers from breaking up claims into individual disputes without counsel.

Thinking about where she is now, Perez explains, “Yeah, I’m put together, but you still see the cracks.” 

From The [F]law:

• Shao Chang, Gig Economy and the Future of Work: Uber & Lyft’s race to the bottom–an opportunity to redefine work
  
• Luke Hinrichs, Freedom from Domination: A Revival of Antitrust Law and the Will to Choose Democracy
  

From The Systemic Justice Journal:

• Sam Rosen, Clauses and Consent: How Forced Arbitration Quietly Took Over Everything
• Elizabeth MeLampy, Fowl Play: Corporate Law and the Chicken Industry