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To Protect Workers and Consumers, Congress Must End Forced Arbitration

In February, Georgia Rep. Hank Johnson, chair of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, reintroduced the FAIR Act. The legislation would protect workers and consumers by eliminating restrictive "forced arbitration" clauses in employment and consumer contracts. The bill would also allow consumers and workers to agree to arbitration after a dispute occurs if doing so is in their best interests. A companion measure has been introduced in the Senate.

Arbitration — a process where third parties resolve legal disputes out of court — is a standard precondition to most, if not all, nonunion employment and consumer contracts. It's considered "forced" because few consumers and workers are aware that they are agreeing to mandatory arbitration when they sign contracts. In most contracts, arbitration is imposed on a take-it-or-leave-it basis before any dispute even occurs; refusing to sign is rarely a realistic option because other sellers and employers impose similar arbitration requirements.

Few consumers or workers are aware of these factors when signing a contract. When signing contracts, consumers and workers agree to adjudicate virtually all types of alleged violations of state and federal laws, including those that protect them against harmful and dangerous products, consumer fraud, employment discrimination, and other forms of wrongdoing.

Consumer and workers' rights advocates have been working for years to end this practice. That's because for several reasons, arbitration benefits corporations over consumers and workers.

Arbitration is similar to a public trial but less formal in a number of important respects. For example, formal rules of evidence and civil procedure generally do not apply in arbitrations. Arbitration is also generally considered a "private" process. Unlike court proceedings, arbitration proceedings lack an impartial judge or jury; an appealable decision; and oversight and transparency. Unlike court cases, arbitration results are rarely a matter of public record, which leads to a lack of transparency and welcome secrecy for employers and corporations. For these reasons, advocates against pre-dispute arbitration clauses argue that arbitration should not be "forced."

In addition, arbitration clauses restrict consumers' and workers' access to justice by stripping them of their right to go to court. Instead, consumers and workers are forced into an arbitration system where corporations write the rules that govern their relationships with workers and consumers and design procedures to interpret and apply these rules when disputes arise. In these circumstances, arbitration proceedings are unfairly tipped in favor of corporations.

Research gathered by the American Association for Justice reveals that people of color and women are more likely than white men to be forced into arbitration, and arbitrators working on these cases are mostly male and overwhelmingly white. At the two largest consumer and employment arbitration providers in the country (AAA and JAMS), 88 percent of arbitrators are white and 77 percent are male.

This lack of diversity presents an issue, particularly for people of color and women workers and consumers interested in seeking justice. Research reveals that corporate defendants disfavor female and minority arbitrators. And when they do oversee cases, female arbitrators rule in favor of consumers and employees more often than male arbitrators.

Need for reform

In 1925, Congress enacted the Federal Arbitration Act, which provides that agreements to arbitrate disputes are enforceable by courts. The law has not been substantially amended since its passage, but modern jurisprudence has substantially expanded its scope. The U.S. Supreme Court's decisions have also supported arbitration agreements that require that disputes be arbitrated on an individual basis, precluding class actions or other collective litigation. In the century since the Federal Arbitration Act's passage, the type and number of arbitrations have increased greatly.

Proponents claim arbitration is an economical and expeditious alternative to litigation. In fact, arbitration creates one-sided agreements that deny consumers and employees advantages afforded by a judicial proceeding. In response, advocates have looked to Congress to remedy this issue. Legislation is long overdue, and Congress must act on it now to protect consumers' and workers' rights. The FAIR Act referenced above would make the first substantial amendment to the Federal Arbitration Act in nearly a century.

This is important because consumers and workers should be able to decide if they want to agree to arbitration after a dispute occurs. They should not be barred from access to court once they've signed an employment and or consumer contract. CPR will continue to push for the passage of the FAIR Act and advocate on behalf of workers and consumers.

Those interested in keeping up to date with CPR's advocacy efforts on this matter should subscribe to our email list for updates.

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Marcha Chaudry | August 2, 2021

To Protect Workers and Consumers, Congress Must End Forced Arbitration

In February, Georgia Rep. Hank Johnson, chair of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, reintroduced the FAIR Act. The legislation would protect workers and consumers by eliminating restrictive "forced arbitration" clauses in employment and consumer contracts. The bill would also allow consumers and workers to agree to arbitration after a dispute occurs if doing so is in their best interests. A companion measure has been introduced in the Senate. Arbitration -- a process where third parties resolve legal disputes out of court -- is a standard precondition to most, if not all, nonunion employment and consumer contracts. It's considered "forced" because few consumers and workers are aware that they are agreeing to mandatory arbitration when they sign contracts. In most contracts, arbitration is imposed on a take-it-or-leave-it basis before any dispute even occurs; refusing to sign is rarely a realistic option because other sellers and employers impose similar arbitration requirements.

Daniel Farber | July 30, 2021

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Clarissa Libertelli | July 29, 2021

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James Goodwin | July 21, 2021

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David Driesen | July 20, 2021

The Specter of Dictatorship Behind the Unitary Executive Theory

Environmentalists have complained for years about presidential control of the administrative agencies charged with protecting the environment, seeing it as a way of thwarting proper administration of environmentally protective laws. But the U.S. Supreme Court in two recent decisions -- Seila Law v. CFPB and Collins v. Yellen -- made presidential control over administrative agencies a constitutional requirement (with limited and unstable exceptions) by embracing the unitary executive theory, which views administrative agencies as presidential lackeys. My new book, The Specter of Dictatorship: Judicial Enabling of Presidential Power, shows that the unitary executive theory is not only bad for environmental policy, but a threat to democracy’s survival, upon which environmental policy and all other sensible policy depends.

Colin Hughes | July 19, 2021

Environmental Justice and the COVID-19 Pandemic: Why the EPA Needs a Funding Boost

U.S. Environmental Protection Agency (EPA) Administrator Michael Regan recently announced that $50 million from the American Rescue Plan will go toward environmental justice programs at the agency. This award will be accompanied by another $50 million to enhance air quality monitoring to target health disparities. This funding will double the amount of grant dollars for EPA’s environmental justice programs by adding $16.7 million in grants and funding for other programs such as school bus electrification, expanded environmental enforcement, and drinking water safety improvements.

Alina Gonzalez, Minor Sinclair | July 15, 2021

Georgia’s Activists of Color Offer Hope for Meaningful Action on Climate Justice

President Joe Biden is breaking the status quo: He has pledged to write a new chapter in America's leadership on climate change. Unlike any other president, he has outlined specific and aggressive targets to reduce carbon emissions and has backed them up with a $2 trillion plan to fight climate change. In the meantime, our climate continues to change rapidly and dramatically, raising the ever more urgent question: Will the politics of climate change shift in time to curb its worst effects, including in states like Georgia? We think it will.