Say "No" to Mandatory Arbitration

By Jason Oliver.

We have all seen them--the little supplements that are quietly slipped into our credit card billing statements or are inserted into our patient intake form at our doctor's offices or into our mechanic's auto repair estimate. OK , maybe we haven't actually seen them at all, but whether we have seen them or not, one thing is for sure--the businesses slipping them past us are going to try to use them against us whether we have seen them or not.

We are talking about mandatory binding arbitration ("BMA") clauses and they are serious business. Serious because big businesses are trying to use BMA's to take away one of our most basic rights--the right to have serious disputes heard and decided by real people--a jury of our peers. This constitutional right is just as important and perhaps sometimes, some would argue, even more important than our right to free speech. This is because for some people, the rest of their life may depend on "the judge" of their case being a group of real people who understand what life is really like for the average person, not some wealthy professional judge who makes a living "disposing of legal matters."

Over the last several decades, arbitration clauses have been used to deprive consumers and employees of their constitutional right to jury trial. When possible, it is advisable to avoid signing any agreement containing an arbitration provision if you value these rights. Also known as "contractual arbitration" or "binding arbitration," this form of "dispute resolution" rarely works to the benefit of middle to low income employees.

Why you ask? The answer is repeat player bias. Repeat player bias refers to the simple fact that employers use the same arbitration company, and sometimes even the very same arbitrator, over and over again. This means that the employee's case is being decided by a company or person that regularly receives income, often perhaps hundreds of thousands of dollars on a yearly basis--from the employer whose case is being decided.

As a matter of human nature, how many times would an employer continue to use an arbitrator that continually handed decisions in favor of employees with stiff damages awards and penalties attached to them? Not long.

In contrast, how many times will the employee bringing the claim have occasion to use or recommend that arbitration company or arbitrator in the future? Not many, if ever.

So it is not difficult to understand that this repeat player bias works to the employee's disadvantage, whereas jury trial does not.

This repeat player bias has been directly noted and observed by courts and discussed at length by legal scholars. For example, see (Bingham, Employment Arbitration: The Repeat Player Effect (1997) 1 Employee Rts. & Employment Poly. J. 189; Schwartz, supra, 1997 Wis. L.Rev. at pp. 60-61.); Mercuro v. Sup.Ct. (Countrywide Secur. Corp.) (2002) 96 Cal.App.4th 167, 178, 116 Cal.Rptr.2d 671, 678).

Quite notably, the California Supreme Court may have even indirectly noted such bias when it observed that damages awards in favor of a plaintiff were generally lower in arbitrations than those in court. Armendariz. v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 111 ["Although it is true that the costs of arbitration are on average smaller than those of litigation, it is also true that amount awarded is on average smaller as well"], citing, Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration, 1997 Wis. L.Rev. 33, 60-61.)

To be clear, employees should seek to avoid binding arbitration, absent an extremely good reason to agree to give up their right to jury trial.

Recent Legislative Developments in the Fight Against Forced Arbitration:

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In January 2010, Senator Al Franken successfully pushed through Congress an amendment (the "Franken Amendment") to a defense bill that prohibits certain types of companies who do business with the U.S. government from forcing employees to arbitrate their Title VII sexual harassment claims. The Amendment arose from KBR's attempt to force KBR Employee, Jamie Leigh Jones, to arbitrate her claims against KBR for her alleged sexual harassment, rape and false imprisonment, at the hands of KBR co-employees (she claimed she was gang-raped and then, after complaining, locked in a storage container by KBR personnel).

Jon Stewart's discussion of the Senators who voted against the Franken Amendment is here:

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See Al Franken Question Supreme Court Nominee Elena Kagan on Mandatory Binding Arbitration in Employment:

News on Arbitration in Employment and Consumer Contracts:

The United States House of Represenatatives Hears from the National Employment Lawyers Association (NELA) and Cliff Palefsky regarding the unfairness of mandatory arbitration - September 15, 2009

Using Supreme Court precedent to defeat arbitration in employment and consumer contracts - September 15, 2009

Have you signed away your right to sue? - March 12, 2008

"Whataburger" trying to cram more than burgers down their patrons throats - February 1, 2008

University of Michigan Study Indicates Business Use Mandatory Arbitration to Avoid Court in Disputes with Consumers but go to Court in Disputes with Other Businesses - December 26, 2007

Employee Rights Increasingly Jeopardized by Mandatory Arbitration as a Condition of Employment - December 18, 2007

Stop Mandatory Arbitration! - January 18, 2007

EEOC's Policy Against Binding Mandatory Arbitration Imposed as a Condition of Employment