‘Forced’ is never fair: What labor arbitration teaches us about arbitration done right—and wrong
As of September 2017, more than 60 million American workers were subject to predispute arbitration “agreements” with their employers. This means that in exchange for the right to get or keep their job, they are forced to agree that if a dispute comes up in the future involving their employment, they won’t bring that dispute in court but will instead take it to a private arbitrator—usually in secret proceedings conducted behind closed doors, under terms dictated by the employer.
The percentage of workers whose employers require them to give up the right to go to court in exchange for their jobs has increased dramatically over the past 25 years, from just 2 percent in 1992 to over 55 percent in 2017. And that figure is climbing even higher in the wake of the Supreme Court’s 5-4 opinion in 2018 in Epic Systems Corp. v. Lewis, which said that employers can impose arbitration contracts on their workers even when one of the terms of the contract is that workers must bring their disputes one at a time and may not join forces with their colleagues to pursue claims collectively. A new report from EPI and the Center for Popular Democracy projects that by 2024, over 80 percent of private-sector, nonunionized workers will be subject to forced arbitration regimes that ban class or collective actions.
Despite its growing prevalence, many American workers still don’t know what arbitration is and don’t realize what rights they’re giving up when they sign the document (or click the button on a computer screen) saying they will resolve future disputes in this manner. But for the 14.7 million workers who belonged to a union in 2018, arbitration may not be such a foreign concept, because arbitration has been a fixture in most unionized workplaces for decades.
However, beyond the use of the word “arbitration,” the system that organized labor and management have long been using to resolve their disputes has almost nothing in common with the top-down, take-it-or-leave-it brand of arbitration to which the Supreme Court gave a seal of approval in Epic Systems. For one thing, arbitration in a unionized workplace is actually the result of an arms-length negotiation, where management and employee representatives jointly agree to the terms of the process. Because the details of labor arbitration are typically spelled out in a collective bargaining agreement, the bargaining process often builds in protections for employees, such as paid time off to participate in the arbitration, a multiple-level appeals process, and a say in selecting the arbitrator. But in Epic Systems-style arbitration, when the employer gets to set all the terms of the arbitration process and present them to workers as a fait accompli, those terms tend to be much more lopsided in the employer’s favor.
Moreover, in labor arbitration both the union representative and management representative participating in the arbitration tend to be familiar with the process. It is rarely the first rodeo for either party. This balance of experience substantially levels the playing field and increases the chances of success for the represented employee. By contrast, when each employee must arbitrate separately against the same employer, the employer has all the benefits of being a repeat player in the forum—access to more information, knowledge of the rules, sometimes even past practice before the same arbitrator—while the worker is trying to navigate the system for the first time. And these advantages have a measurable impact: workers fare decidedly worse in arbitrations against repeat player employers than they do when the two sides are more evenly matched in terms of experience.
In short, the union experience shows that arbitration can be a fair process for resolving disputes—when it is actually agreed to, and engaged in, by two parties with relatively equal bargaining power. But when the only choice an employee is given is to agree to arbitrate on the employer’s terms (with no ability to join forces with other affected workers) or find another job, for most workers that is the equivalent of no choice at all.
Justice Ginsburg wrote in her dissent in Epic Systems that Congress should step in to correct an opinion she described as “egregiously wrong.” And with the introduction of the Restoring Justice for Workers Act, several members of Congress are aiming to do just that. This legislation would undo the Epic Systems opinion by making it illegal for businesses to force workers to give up their right to band together in class or collective actions, and would also ban predispute arbitration of work-related disputes. In the spirit of the more balanced world of labor arbitration, the Restoring Justice for Workers Act allows for work-related disputes to be resolved in arbitration after they arise, but only if the agreement to go to arbitration is affirmatively accepted by the worker, with a mandatory review period and other safeguards to protect against any threats or coercion. Meanwhile, the FAIR (Forced Arbitration Injustice Repeal) Act, introduced by Representative Hank Johnson and Senator Richard Blumenthal, would ban predispute arbitration of work disputes as well as consumer, civil rights, and antitrust disputes. Passing one or both of these bills would go a long way towards empowering workers and restoring their ability to hold lawbreaking employers accountable.