On the last day of February 2019, Democrats in Congress introduced House and Senate bills to prohibit companies in the United States from enforcing mandatory arbitration clauses in employment, consumer, civil rights, and antitrust disputes. The Forced Arbitration Injustice Repeal Act (FAIR) of 2019 is the most recent effort to undo the enforceability of mandatory arbitration clauses.
Recent End to Forced Arbitration at Google
The proposed legislation to prohibit forced arbitration comes on the heels of Google’s decision to end forced arbitration. Following a walkout in November 2018 to protest its handling of sexual harassment claims, Google re-evaluated its policies regarding forced arbitration. To end the walkout, Google employees’ demanded that the company put an end to its forced arbitration clauses in employment contracts. Google responded by agreeing to end the requirement for sexual harassment and assault complaints but refused to end the practice for all complaints. Shortly after that claim, Google announced it would be putting an end to its forced arbitration policies for all disputes.
Forced Arbitration Doesn’t Benefit the Employee
Forced arbitration clauses require any disputes between an employee and a company to be settled in arbitration. Also, forced arbitration clauses require the employees to waive their right to litigation, including joining a class action lawsuit. The waiver of litigation rights does not usually apply to the company, however, allowing large companies to have the upper hand in any legal dispute with an employee.
Many companies defend forced arbitration clauses by saying that they save both the employee and company a lot of money. While arbitration can be very expensive, litigation in court usually costs far more. Employees involved in a dispute that requires arbitration must pay a costly filing fee just to get the process started, and they are also required to pay their share of the arbitrator’s hourly fee.
Another downside for employees is that arbitration often gives the advantage to the company. Most individual employees will only need the service of an arbitrator once, but large companies use them regularly. For this reason, arbitrators have a tendency to decide disputes in favor of the company in order to ensure they are hired the next time the company is in need of the arbitrator’s services.
Regarding the proposed legislation, Senator Richard Blumenthal (D-Conn.) had this to say: “No longer should people be forced to suffer in silence, to endure the unfairness of this kind of rigged system, stripped of their rights and forced to go before a non usual arbiter. A lobbyist for the American Association for Justice said, “Forced arbitration has become insidious in the United States as corporations use the secretive system to silence sexual harassment survivors, take advantage of workers and consumers, and undermine public health and safety.”
At the current time, just under 57% of the country’s private sector nonunion employees are subject to mandatory employment arbitration contracts. One study has found that employer-mandated arbitration cases were resolved in the employee’s favor only 21.4% of the time; win rates for employees in court were significantly higher at 36.4%.