Economic Snapshot | forced-arbitration

Mandatory arbitration unfairly tilts the legal system in favor of corporations and employers

Employers are increasingly forcing employees to give up their right to sue in court and to accept private arbitration as their only remedy for violations of statutory and common law rights. Private arbitration can forbid class actions, limit damages, allow the employer to choose the arbitrator, and cut off appeals, resulting in a system unfairly tilted in the employer’s favor. As Stone and Colvin find, employees are much less likely to win in mandatory arbitration than in federal court: employees in mandatory arbitration win only about a fifth of the time (21.4 percent), whereas they win over one-third (36.4 percent) of the time in federal courts.

Differences in damages awarded are even greater. The typical award in mandatory arbitration ($36,500) is only 21 percent of the median award in the federal courts ($176,426). While there are additional factors to consider in comparing the two systems, at the outset it is important to recognize that in a simple comparison, mandatory arbitration is massively less favorable to employees than are the courts.