Forced arbitration clauses are provisions that are often found in employment contracts or consumer terms of service. These clauses prevent the signer from filing a lawsuit against a company in the event of a dispute, instead pushing the case into a private arbitration process with a third-party mediator. This practice strips employees and consumers, particularly victims of harassment and discrimination, of their right to choose to resolve workplace disputes through litigation. The consequences of forced arbitration are not widely known, and companies use this practice to prevent employees and consumers from bringing lawsuits, instead relegating disputes to a private process that favors corporate interests.
These provisions also hamper class-action legal efforts, as companies can be doing illegal things along the edges that are falling through the legal cracks. Congress has already taken some action to crack down on how companies wield forced arbitration clauses. President Joe Biden in 2022 signed bipartisan legislation that exempted sexual assault and harassment claims from private arbitration, allowing victims of workplace harassment to seek accountability from their employers in court. Efforts are also underway to expand those exemptions.
However, some lawmakers and at least one witness were cautious about bringing the hammer down on companies who rely on arbitration to settle disputes. Private arbitration is cheaper and faster for claimants than taking their cases to court. Employees or consumers who have a dispute with a company may have a hard time finding a lawyer to take their case, and may be subjected to the delays of an overburdened judiciary.
Despite that, many experts argue that forced arbitration clauses are unfair to employees and consumers, and that carefully drawn rules should regulate such contracts. Advocates argue that forced arbitration clauses should be eliminated, as they empower companies to violate the law while hurting workers and consumers.
U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, today questioned witnesses during a Senate Judiciary Committee hearing entitled “Small Print, Big Impact: Examining the Effects of Forced Arbitration.” The hearing examined the use of forced arbitration clauses in employment contracts, consumer agreements, and other areas, as well as the injustices faced by workers, consumers, and others who are denied their days in court by forced arbitration clauses.
Durbin first questioned Ms. Joanne Grace, a nurse who faced age-based comments from her supervisor and was laid off and replaced by a younger, less experienced nurse after returning from COVID-related sick leave in 2021. Ms. Grace has brought age discrimination claims against her former employer in district court, but they are currently trying to force her case into arbitration, alleging she agreed to arbitrate any future disputes by completing certain arbitration-related training. Durbin asked about her experience with forced arbitration.
“On behalf of an institution filled with seasoned warriors, we stand shoulder to shoulder with you in this effort. Thank you for telling your story for all the country to hear. It’s very important. You never signed, checked a box, or in any way indicated you were part of any forced arbitration agreement?” Durbin asked.
Ms. Grace responded that she never signed any forced arbitration agreement, and she would “never advocate for anybody to sign it.”
The debate over forced arbitration clauses is ongoing, and it remains to be seen what action Congress will take to address this issue.
