A Barrier to Social and Financial Justice  — Affect Fund

Even when people do use arbitration proceedings, the outcomes are usually not in their favor. Victims are less likely to prevail in arbitration, compared to in litigation, and, if they do win, they tend to receive lower damages. Corporations often insert specific terms into forced arbitration agreements that disadvantage workers and consumers who choose to bring claims through arbitration. According to a report from the Economic Policy Institute, “The average consumer ends up paying financial institutions in arbitration.”  

And despite the term “arbitration agreement,” workers and consumers rarely knowingly “agree” to forced arbitration clauses when they accept a new job or purchase a product. These clauses often consist of complex legal jargon buried in the terms and conditions of contracts. Research reveals that most people do not understand that they’re giving up their right to sue when they sign a forced arbitration agreement. This data demonstrates how forced arbitration reflects the extreme power imbalances between everyday people and corporations. 

Forced arbitration replicates existing inequalities  

Some people are more at risk of being exploited by corporations than others. As a result, forced arbitration agreements and class action waivers contribute to social and economic injustice. For example, low-income people of color are disproportionately affected by predatory lending and consumer fraud. Likewise, low-income workers, workers of color, and immigrant workers are more likely to suffer rights violations, such as wage theft and unsafe working conditions. Such employees might also experience identity-based workplace discrimination. These statistics are particularly concerning because forced arbitration agreements are especially common in industries with large numbers of low-income workers, Black workers, and female workers. Because vulnerable communities are more likely to experience harm at the hands of corporations, forced arbitration agreements can exacerbate existing inequalities when they prevent victims of illegal conduct from seeking justice in court.   

Moreover, when forced arbitration agreements ban class actions, workers and consumers are unable to address systemic issues and achieve broad social change. Class actions can draw public attention to corporate misconduct and force companies to change their practices. In contrast, arbitration is a confidential process. When claims are individually forced into arbitration, the public does not learn why these claims have been brought. This secrecy, in turn, enables future violations of workers’ and consumers’ rights because corporations are not deterred by the threat of public accountability.   

The ongoing fight to end forced arbitration 

There have been some promising recent developments in the fight to end forced arbitration. With the rise of the #MeToo movement, advocates highlighted how forced arbitration agreements have been used to silence survivors of sexual violence in the workplace. In March 2022, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which prohibits the use of forced arbitration agreements and class action waivers in cases involving claims of sexual assault and harassment. The legislation is a major achievement that will allow survivors to have their day in court. Also, in the summer of 2022, the Supreme Court limited the enforceability of some forced arbitration agreements in two unanimous pro-worker decisions (Morgan v. Sundance and Southwest v. Saxon).