Have you ever purchased something online and checked the box agreeing to a linked Terms and Conditions page? Have you downloaded an app to your phone and agreed to Terms and Conditions and then used the app to rent a scooter, bike, or use a ride-sharing service? Have you signed a contract with an employer in order to take the job? Has your bank wrongly charged you an overdraft fee? Have you filled out nursing home paperwork for a loved one in order to get them admitted to a facility?
Most of us do not realize that we are bound by forced or mandatory arbitration provisions until it is too late. Buried in the fine print, most consumer contracts and agreements contain a subtle but powerful clause that is rarely understood. The clause is so powerful that it removes your Seventh Amendment right to a jury trial. The waiver to a jury trial is typically in a section titled “Arbitration Agreement”, “Binding Mandatory Arbitration” or “Dispute Resolution Mechanism” and heavily favors corporations over consumers and employees. Instead of going to court, arbitration agreements require you to go before an arbitrator or panel of arbitrators to determine the outcome of your dispute without applying the rules of evidence or following court precedent.
Arbitration provisions can be traced back to The Federal Arbitration Act of 1925 and traditionally involved sovereign nations or sophisticated corporations who were on equal playing fields and voluntarily agreed to submit their disagreements to arbitration. However, over the last two decades, they have become popular additions (on a take-it-or-leave-it basis) to employment contracts, nursing home contracts, cell phone agreements, credit card contracts, and car loans or leases. As a result of agreeing to terms and conditions with arbitration provisions, consumers generally cannot sue for negligence, defective products, lost wages, discrimination, or scams. Arbitration provisions also attempt to prohibit the use of a class action of any kind.
Many people think arbitration and mediation are the same thing, but they are drastically different processes. Mediation uses an independent third-party mediator agreed to by all parties or ordered by a court to resolve disputes. Each party must agree to the terms of a settlement in order to resolve the dispute— therefore mediation is a non-binding processes. However, arbitration is a private, lawless system without a judge, jury, or a right to appeal—and is binding. The consumer or worker has to pay large fees simply to initiate the arbitration process, and sometimes has to travel across the country on their own dime to attend the arbitration. The rules of evidence found in our court system do not apply in arbitration, and the arbitrators are not required to be judges or lawyers. Additionally, most arbitration provisions stipulate that the company or employer gets to decide who the arbitrator is, thereby creating bias and a conflict of interest for the arbitrator. Forced arbitration also allows companies to keep their wrongdoings secret and avoid responsibility and transparency. As a result, the company frequently repeats the illegal conduct, sometimes on a large scale.
A bipartisan group lead by U.S. Representative Hank Johnson and U.S. Senator Richard Blumenthal introduced legislation in February 2019 called the FAIR Act (Forced Arbitration Injustice Repeal Act). The FAIR Act, H.R. 1423, seeks to prohibit pre-dispute arbitration agreements that force arbitration of future employment, consumer, antitrust, or civil rights disputes and prohibit agreements and practices that interfere with the rights of individuals, workers, and small businesses to participate in joint, class, or collective actions related to employment, consumer, antitrust, or civil rights disputes.
The FAIR Act will help level the playing field for consumers and workers by ending mandatory or forced arbitration and restore Americans’ constitutional right to a trial by jury. Please reach out to your Congressional Representative or Senators to enact the FAIR Act. Every tweet, letter, and phone call can help ensure that companies do not continue to take advantage of consumers.
