Forced Arbitration is Cutting off Access to Justice. Congress Can Stop It.

Americans are protected by hard-won workplace safety, anti-discrimination and consumer protection laws. We shouldn’t have to sign away these legal rights every time we go into work or make a purchase. But because of a growing practice called forced arbitration, millions of Americans are blocked from accessing the courts when powerful companies break the law. 

Companies from AT&T to Zales put forced arbitration clauses into the fine print of boilerplate contracts. People sign these contracts everyday without a second thought when they accept a job offer, sign up for a credit card, move a loved one into a nursing home, or make purchases as small as a salad or as meaningful as an engagement ring.

What happens if you sign a forced arbitration agreement?  If your rights are violated, you can’t file a lawsuit in court. Instead of arguing your case in front of an impartial judge, you go before a private arbiter, who is often chosen by the very company you’re trying to sue. Once arbitration is resolved, the result is kept secret, making it virtually impossible to prove pervasive illegal behavior. The legal system is, in theory, balanced between plaintiff, defendant and judge — governed by the same pre-existing legal rules for everyone. Meanwhile, in forced arbitration, a company being sued can design the rules and pay the “judge.” 

Unsurprisingly, being subject to forced arbitration discourages most people from bringing their claims in the first place. The rare consumers who pursue arbitration only end up obtaining monetary relief about 9 percent of the time. In fact, the average consumer ends up paying over $7,000 as a result of an arbitration action. Americans are more likely to be struck by lightning than win in forced arbitration. 

And forced arbitration is everywhere. Nearly half of checking accounts and the vast majority of cell phone contracts, private student loans and storefront payday loans have forced arbitration clauses. Today, more than half of nonunion private-sector workers are subject to forced arbitration. This means that over 60 million American workers can’t bring their claims in court if they experience illegal treatment at work, like sexual harassment, racial discrimination, or wage theft. Companies can, in effect, face little to no penalty for breaking the law. 

As future lawyers, we believe it’s our duty to demystify and dismantle the coercive legal tools that impede access to justice. Forced arbitration clauses are written in hard-to-understand legal jargon and hidden in even harder-to-read fine print, but they have devastating consequences. A man in Illinois was blocked from bringing a lawsuit against Wayfair for selling him a headboard riddled with bedbugs, because he had signed a forced arbitration contract. In Michigan, a manager at Petland admitted that the company put forced arbitration clauses in their contracts because they were tired of being sued for selling people sick puppies from puppy mills. And when hundreds of employees at Sterling Jewelers reported pervasive sexual harassment and assault, they were forced into secret and individual arbitration. 

As the New York Times uncovered, forced arbitration was developed by corporate lawyers — representing large financial institutions like American Express, Chase and General Electric — who conspired to insulate these companies from lawsuits. The goal was simple: “to kill class actions.” The vast majority of contracts with forced arbitration clauses also include class action waivers, which stop people from banding together to bring their claims collectively. Class actions are a vital tool, since most consumers and employees do not have the means to bring individual lawsuits. 

As law students who have been organizing against forced arbitration on our own campuses, we know firsthand that it shouldn’t be up to companies to do the right thing. Although the largest law firm in the country, Kirkland & Ellis, stopped using forced arbitration after we started our #DumpKirkland campaign to encourage students to boycott their recruitment efforts, we’ve had mixed success in pressuring law firms to drop forced arbitration. DLA Piper has doubled down on its use of forced arbitration, and our protests against Venable, LLP have been met with silence. Even when companies change their practices, there’s nothing stopping them from going back on their word, like Uber did this summer. The very companies that are violating people’s legal rights cannot be trusted to stop of their own accord. 

Unfortunately, we can’t turn to the courts to end this wildly unfair and unpopular practice. The Supreme Court has facilitated forced arbitration’s corporate takeover of the law in a series of rulings based on the Federal Arbitration Act, a 1925 law that was never intended to apply to workers or consumers. But Congress has the power to fix this problem

On February 28, 2019, Representative Hank Johnson (D-Ga.) and Senator Richard Blumenthal (D-Conn.) introduced the Forced Arbitration Injustice Repeal Act. The FAIR Act would prohibit forced arbitration in future employment, consumer, antitrust or civil rights disputes. It would also protect people’s rights to participate in collective action in these kinds of disputes. Eighty-four percent of voters support legislation like the FAIR Act, numbers that are bipartisan and overwhelming. 

With 222 cosponsors in the House and 34 in the Senate, the FAIR Act is gaining momentum. Last Tuesday, the bill was successfully voted out of the House Judiciary Committee on a bipartisan basis and is now headed for a floor vote. The room was packed with FAIR Act supporters who have been victimized by forced arbitration. Rep. Matt Gaetz (R-Fla.) spoke about conversations he had with survivors of workplace sexual harassment who were unable to have their claims heard because of forced arbitration, and described the FAIR Act as “the most America-First bill to have been brought forward in the House Judiciary Committee this Congress.” Another cosponsor, Rep. Jerry Nadler (D-NY), asked, “if Congress passes laws that can’t be enforced in the real world, what good are those laws?” 

In the words of Senator Blumenthal, “Forced arbitration is unfair, unjust, and un-American.”

We’re calling on Congress to pass the FAIR Act now.

Beth Feldstein and Emma Janger are students at Harvard Law School and organizers with the People’s Parity Project, a grassroots network of law students organizing against the ways that the legal profession — and the law itself — enables harassment, discrimination and other injustices.

Morning Consult