This post was originally published on March 18, 2010:
Why Arbitration Agreements Are Un-AmericanI know that I blogged about this before, but the situation is only getting worse because the mood in the country is only getting more paranoid, suspicious and self-interested. Agreements to arbitrate employment rights claims, as well as claims involving many other rights, are being forced on Americans.
This allows corporate America to chip away at civil liberties while at the same time making everyone feel grateful that they – or members of their family – “still have jobs.” It allows corporate America and its apologists on both sides of the political aisle to rationalize the destruction of one of the principals on which America was founded – the right to a trial by jury – under the guise of “tightening belts” and “economic efficiency.”
I had a client come to us the other day who had been viciously, repeatedly and horribly sexually harassed at work. The disgusting commentary and the smugness with which it was delivered by her co-workers and by management was truly outrageous. They never seemed very nervous about what she would do, and she always wondered why. She came to see me, explained the situation, and we initiated a lawsuit.
Once we initiated the lawsuit, I found out why the perpetrators were so smug.
Although my client had forgotten doing so, she had signed an agreement to “binding arbitration” of any “dispute arising from” her employment relationship.
Before I get back to the case of Mrs. X, let me tell you a little bit about these “binding arbitration” agreements, the people who arbitrate cases (usually) under these agreements and why they exist.
Once again, as usual, it’s a question of what the conspirators want you to believe and what is the truth.
What they want you to believe is what it says in the Federal Arbitration Act, what it says in arbitration agreements, and what any corporate type will tell you if you talk to them about the subject matter. Incidentally, it’s the same thing that most defense lawyers will tell you. It’s the same thing that most Republican legislators and quite a number of Democratic legislators will tell you. It’s the same thing that the Federal Chamber of Commerce will tell. It’s certainly what the HR and PR people in the pharmaceutical, manufacturing, financial, medical and any number of other corporate sectors will tell you.
What these people all have in common, of course, is that they do long range strategic planning for their companies and for their industry. They understand that a penny spent early is a dollar saved later. So what’s their “penny” spent early?
It's paying an arbitrator fees to decide a case, rather than having the case decided in a court of law, where justice is essentially free. Why, you ask, would a company voluntarily pay an arbitrator as much as $400.00 or more per hour, racking up tens of thousands in arbitration fees over the course of the particular piece of arbitration, when it can have free access to a judge and jury?
The answer, of course, must be that the company thinks it's going to benefit from spending that extra money somehow. So how do you think it intends to benefit? It benefits, of course, because the arbitrators, by and large, don’t render the same kinds of verdicts that juries do. Arbitrators understand that for the most part, the corporation is paying their fees (we’ll get to what happens when individual litigants are expected to “share” arbitrators' fees in a minute). They understand that it’s corporations, corporate attorneys and corporate lobbyists and their legislator allies who create anti-consumer and anti-civil rights statutes like the Federal Arbitration Act. These corporate types are the reason the arbitrators and the organizations which administrate arbitrations have a living.
In short, they understand on which side their bread is buttered and, for the most part, unfortunately, they tend to deliver accordingly. Arbitration results, by and large, are manifestly less favorable to plaintiffs than jury verdicts. Statistically, more cases are lost by employment plaintiffs in arbitration than are lost by employment plaintiffs in State court and even in Federal court, where the rules can sometimes be “anti-plaintiff” and where some of the judiciary might be somewhat conservative in its leanings.
I’m not getting into, in this article the specifics of how, consciously or unconsciously, arbitrators lean in favor of corporations and how they tend to minimize their verdicts, restrict access to certain types of damages, restrict access to certain types of information that the plaintiffs need to prove their cases, etc. I really don’t care whether they are doing it consciously or unconsciously, what I care about is the fact that they are doing it at all.
All you need to see is the “you know what” – eating grin on the face of the corporate representatives and corporate attorneys when they leave in arbitration where they might have paid $20,000 or $30,000 in arbitrator fees but won a case that they would have lost in front of a jury, of where they minimized a verdict in a case where a jury might have done a considerably better job. They realize they're making an investment, over the course of many such cases, and that investment is going to pay dividends in the long term.
It’s why those companies will tell you anything they need to tell you in order to get you to support initiatives or statutes like the Federal Arbitration Act and why they constantly try to “hide” pro-arbitration provisions in all sorts of bills having nothing whatsoever to do with the management of workers in this country. It’s why some defense firms are even attempting to get unions to waive the rights of its members in favor of arbitration of all work related claims in Collective Bargaining Agreements.
I’m going to say this without drama and without flare, because I want you to understand how important it is: arbitration of any dispute which is compelled or coerced is un-American and eats away at your civil liberties, whether you realize it or not, whether you want to admit it or not.
The day that corporations are looking for will not be long in arriving: when they can manage and anticipate the dollar cost of human suffering and simply decide when it's okay and not okay to hurt their workers, discriminate against them, retaliate against them and abuse them. They'll simply decide how much money they think they'll need to spend to win the arbitration, and then they'll do whatever they feel that they need to do, knowing that the cost is predictable and manageable.
The first time that a corporation does something voluntarily for the good of mankind will be the first time, in my book. Any time a corporation does something “good,” it's got an angle. I don’t believe corporations will ever do the right thing or look for the right method of dispute resolution simply because it's fair and just. They'll look for the efficient, effective and inexpensive method of dispute resolution because it minimizes the cost of hurting people.
I don’t mean to insult all arbitrators, but I do mean to insult the ones that know where their bread is buttered and who act accordingly. I do intend to “call out” the individuals who'll talk out of one side of their face, calling me an alarmist for ranting and raving about this, and suggest that arbitration is just fine while speaking publicly, but who'll privately giggle and laugh at the idea that anyone actually believes that arbitration isn’t an atrocity.
But it gets worse. Much worse. So far, I’ve been talking about the arbitration agreements that involve the corporation paying the full cost. These are unfair. They restrict access to information. They restrict the time within which the plaintiff can marshal information to bear their burden of proof. They restrict rights. They restrict damages. But at least the corporation pays the bill, which means that an individual earning a middle class living wage doesn’t have to worry about paying an arbitrator for the privilege of justice.
Yet courts will also enforce arbitration agreements that require the injured worker to pay half the cost of arbitration. The words “equal” and “fair” are used to explain this horrific practice, as if the corporation, possessed of hundreds of thousands, millions or billions in assets, is somehow “equally positioned” to spend, when compared to the $39,000 a year worker discriminatorily discharged with two kids and a spouse to support at home.
What a joke.
The corporations know that this is piggish and disgusting. Yet they include this language in agreements every day. Want to know why? Because no matter whether a judge wishes to be fair or unfair about the impact of such agreements, the Federal Arbitration Act and the State Arbitration Act tend to tie judicial hands when attempting to interpret these agreements. Some judges, out of a sense of higher justice, will rule against the Act and fail to enforce those particular provisions of arbitration agreements while still sending the matter to arbitration. They will require that the corporation pay all fees on the grounds that any requirement that an individual pay anywhere from $5,000 to $15,000 in arbitrators’ fees is as good as saying only the wealthiest workers in this country have any rights at all.
Most judges, however, will feel beholden to follow the law as they understand it and some are happy to see matters leave their court room and become someone else’s problem.
These arbitration agreements are even worse than un-American. They are fascist. They are as bad as a “no frills auto insurance policy”, which provides basically no coverage whatsoever for a highly reduced premium. It’s the same as building a house in a swamp or buying a swaybacked horse. No matter how cheap the deal is, if you can make no use of it whatsoever, than it's no deal at all.
“Arbitration” agreements are not “fair.” They are not “equal.” They are not “efficient” methods of delivering “justice.” They are not “alternative dispute resolution.”
These are tough economic times. Corporations are “tightening their belts” across the country. Yet CEOs, board of directors’ members and other executives seem to have record salaries despite the poor economic times. Tax payers seem to be called upon to bail out people who draft their own golden parachutes with the bail out money and then laugh at the rest of us because we were suckered into the bail out. Corporate wrongdoers still get to avoid jail when they should be held personally accountable for anything they do wrong in the name of service to the corporation's ever growing greed.
“Chambers of Commerce,” really just lobbying organizations for corporate greed, keep “spinning” all kinds of nonsense about the need for “tort reform” and whittling away at the system of justice instead of admitting that the system of justice is fine, but that the corporate culture in the country is toxic, un-American and horrid.
Fight arbitration agreements. Don’t sign them. Insist on negotiation. Don’t support candidates that support arbitration agreements. Insist they explain how and why this doesn’t hurt people. Explain to your bosses, co-workers and union representatives that you don’t want them.
Because on the journey to justice, arbitration agreements are land mines.
