In labor agreements, arbitration is a joint procedure to avoid a work stoppage or other disruption, a system where unions and employers agree on a professional arbitrator from the non-profit American Arbitration Association or similar group to consider and resolve contractual disputes.
Outside of union contracts, arbitration can work differently. Positive experiences include alternatives in family disputes, for instance. But negative experiences include “forced arbitration” when other avenues to resolve disagreements are fairer.
Forced arbitration isn’t uncommon any more. Whether you’re applying for a low-wage job or buying something from a web site, you sign papers or hit “agree” without reading lengthy text. And you give up your right to go to court.
The country now faces this from the cradle to the grave, as businesses requiring arbitration include obstetric clinics and funeral homes, but also restaurants and retailers, and internet and tech companies.
Preventing workers or consumers from going to court, corporations weaken or prevent most challenges to a host of concerns: medical malpractice and wrongful death, wage theft and discrimination, sexual harassment and fraud, predatory lending and elder abuse.
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However, reform may be possible. The Consumer Financial Protection Bureau last month proposed a federal rule that would ban mandatory-arbitration clauses in financial services, from banks and credit card companies to insurers and investment firms. The CFPB wants to prohibit companies from putting forced arbitration in contracts preventing class-action lawsuits. Under the proposal, companies would still be able to include arbitration clauses in their contracts, but clauses would have to say that they cannot stop consumers from being part of a class action in court.
It’s a small step, protecting class-action suits more than limiting forced arbitration for individuals. Still, it’s significant because corporations have increasingly forces plaintiffs in class-action suits into arbitration as individuals.
“If you have a dispute with the company, you no longer have your constitutional right to civil jury trial,” said Joanne Doroshow, founder and director of the Center for Justice and Democracy.
“You must resolve that dispute in a corporate-designed arbitration system, run by an arbitrator who may or may not even be a lawyer, who doesn’t have to follow any rules of law,” she continued. “It’s secret; there’s basically no appeal; you are basically subject to the biases and manipulations of the arbitrator and the company who hired that arbitrator.”
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