What do an octogenarian nun, a Wells Fargo banking customer, and a Chipotle burrito-maker have in common? They all experienced serious violations of their rights and were blocked from seeking justice in court because of forced arbitration.
In a truly harrowing story, the 87-year-old nun was raped in the nursing home where she resided, but her family was barred from suing the nursing home for negligence. Wells Fargo opened over 3 million fake accounts in customers’ names, but these customers were also blocked from court and forced into arbitration instead; they had no hope for redress until the Consumer Fraud Protection Bureau stepped in. And nearly 3,000 Chipotle workers were kicked out of a wage-theft lawsuit last year for the same reason.
These cases are emblematic of a situation where patients, workers, and consumers often have no chance at getting access to real justice in this country. But workers and others have been fighting back, and some Democratic members of Congress joined that fight on Thursday. Sen. Richard Blumenthal and Reps. Hank Johnson and Jerry Nadler announced that they are introducing a bill to prevent companies from using pre-dispute agreements to force arbitration of future employment, consumer, antitrust, or civil rights disputes. Their bill, the Forced Arbitration Injustice Repeal Act, would also disallow companies’ practice of forcing workers or consumers to give up their rights to bring a class action, a related impediment to justice.
Congressional leaders and advocates in announcing this bill, along with a package of related proposals, were joined by ordinary people blocked from court access by forced arbitration. One speaker was sexually assaulted by a massage therapist; when she tried for a year and a half to cancel her monthly membership with Massage Envy, she could only do so by first agreeing to forced arbitration. There was also a service member who had been fired the day before his deployment to Afghanistan, in violation of a law that ensures prompt re-employment of service members when they return from duty. Another woman had been charged unlawfully high interest rates (1,000 percent) by a payday lender who also auto-renewed her loan, which is also illegal. There was the DirecTV customer charged $200 just for trying to cancel her nonfunctional television service. All were blocked from court.
Why is arbitration so bad? Well, it’s private and secretive, unlike court proceedings which are public record. This opacity has allowed outrageous violations, in some cases years of sexual harassment and predation, to remain hidden from view and therefore to continue. There are no appeal rights, and people don’t have the same rights to fact finding (known as discovery) in arbitration as in court. This fact-finding process is critical in many cases involving workplace and civil rights.
You don’t have to be a conspiracy theorist to conclude that arbitration is rigged against the little guy. Many a study has demonstrated that it is for workers and consumers alike. There are various reasons for this: The company is a repeat player with the arbitrator, while the little guy is not; the company often pays for and has a greater role in selecting the arbitrator. With rules like these, it’s no surprise that workers lose more in arbitration than in court. As for consumers, a 2017 Economic Policy Institute report found that the typical consumer doesn’t win anything, but in fact ends up actually paying financial institutions in arbitration, averaging an eye-popping $7,725.
How did we get here? The Federal Arbitration Act, passed in 1925, was originally intended to ensure that companies that agreed to out-of-court dispute resolution couldn’t back out of those commitments and sue. The concept was based on the underlying assumption that these agreements were consciously and affirmatively negotiated by parties of roughly equal bargaining power and actually agreed upon in a meaningful sense. The Supreme Court’s conservative members, however, have repeatedly treated arbitration clauses with something that can only be described as reverence, engaging in the fiction that arbitration clauses are actually arbitration agreements.
But in their modern incarnation, they’re not agreements in any sense of the word. They’re on boilerplate, non-negotiated forms, buried in the fine print, and people have no choice but to agree to these terms if they want to get a job, open a bank account, or place their beloved family member in a nursing home. Some scholars have even considered whether forcing workers into arbitration actually violates the seventh amendment, which ensures the right to trial by jury.
The end result of our current system is that corporations escape accountability for all kinds of illegality and abuse.
Some random company’s lawyered-up agreement should not be treated as a holy text in our country, certainly not when it contradicts the Constitution and allows people’s rights to be trampled. Workers deserve fair pay. Women deserve not to be groped on the job. Consumers deserve honest dealings. And nursing home patients deserve dignified and decent care. When gross violations of these basic rights occur, all of these people deserve the ability to get some redress.
This is actually a bipartisan issue, or at least it should be: In a survey earlier this year, 84 percent of Americans said they would support legislation to ensure court access and stop forced arbitration for consumers and employees.
The FAIR Act is a chance for Congress to get something done. Our legislators should stand up for basic American values and constitutional principles. They should support this new proposal, and we should call on them to do so.