The Federal Arbitration Act and Access to Justice: Will Recent Supreme Court Decisions Undermine the Rights of Consumers, Workers, and Small Businesses?
Testimony of Wade Henderson, President & CEO
The Leadership Conference on Civil and Human Rights
December 17, 2013
Senate Committee on the Judiciary
Categories: Jobs & Economy
Chairman Leahy, Ranking Member Grassley, and Members of the Committee: thank you for holding today’s hearing on the urgent need to outlaw forced arbitration for all America’s consumers and workers. On behalf of The Leadership Conference on Civil and Human Rights, I am pleased to provide this written statement for inclusion in the record.
The Leadership Conference on Civil and Human Rights is a coalition charged by its diverse membership to promote and protect the civil and human rights of all persons in the United States. Founded in 1950 by A. Philip Randolph, Arnold Aronson, and Roy Wilkins, The Leadership Conference works in support of policies that further the goal of equality under law through legislative advocacy and public education. The Leadership Conference’s more than 200 national organizations represent persons of color, women, children, organized labor, persons with disabilities, older adults, gays and lesbians, and major religious groups. The Leadership Conference is committed to building an America that is as good as its ideals – an America that affords everyone access to quality education, housing, health care, collective bargaining rights in the workplace, economic opportunity, and financial security.
I applaud the Committee for holding this hearing on a matter of great significance to the civil and human rights community. For The Leadership Conference, access to the judicial system is a fundamental right that must be preserved. It is essential to our fair and unfettered democracy. Indeed, it is the language of our democracy.
Forced Arbitration Hurts Consumers and Employees
Arbitration can be a fair and effective method of dispute resolution when parties voluntarily agree to arbitrate. Instead, pre-dispute binding mandatory arbitration clauses are increasingly proliferating in: employment contracts; every day consumer contracts for products and services including credit cards, payday loans, health insurance policies, student loans, cell phones, and car loans; and civil rights disputes. Binding mandatory arbitration clauses are buried in the fine print of contracts and employee handbooks, which burden consumers and deprive them of equal justice under the law.
First, this practice is one-sided because corporations write the forced arbitration clauses in a way that often steers the entire process to the company’s advantage, including specifying the arbitrator and payment terms. Since the clauses are written in the contracts, an individual cannot adjust the process and must abandon or accept the product, service, or job as presented. Second, binding mandatory arbitration does not have legal protections nor is it subject to public review to ensure that the arbitrator’s decision was legitimate, avoiding transparency and accountability. Third, the practice removes the fundamental right of equal justice under the law. Forced arbitration makes the dozens of anti-discrimination laws meaningless because they are unenforceable in court, allowing employers the freedom to ignore civil rights laws intended to protect people from employment discrimination on the basis of age, sex, religion, race, and disability. Finally, a dispute under binding mandatory arbitration imposes high costs, including attorney and arbitrator fees, which most individuals cannot afford, while for companies it is the “price of doing business.” Thus, the burden to individuals harms their ability to seek justice.
Recent Supreme Court decisions have stripped away statutory rights from consumers and employees. AT&T Mobility LLC v. Concepcion, a 2011 consumer rights case, undermined the use of class actions in the pursuit of justice against corporate civil and employment rights infractions. Concepcion allowed forced arbitrations and the inclusion of class action bans within arbitration clauses. The decision contradicts at least 20 states that have struck down bans on class action lawsuits, by freeing companies from accountability when they infringe upon civil rights and employment laws.
More recently, in American Express v. Italian Colors Restaurant et al, the Court considered a challenge to anticompetitive practices of American Express that violated federal antitrust laws. Despite these violations, the Court ruled that forced arbitration and class action bans are protected even when an individual can prove that the cost of arbitration would be too high to pursue.
Class action lawsuits have long been an important means for individuals to seek remedy for civil rights, consumer, and employee infractions. Many individuals cannot afford to settle disputes through arbitration. This problem is exacerbated when individuals cannot come together to spread the costs of a lawsuit. Corporate bans of class actions allow businesses to evade well-established civil rights and employment laws, rendering them ineffective. The deprivation of rights afforded by the Court’s decisions in Concepcion and American Express could be remedied with the Arbitration Fairness Act.
The Arbitration Fairness Act Would Restore Choice to the Judicial Process
The Arbitration Fairness Act (AFA), S. 878, reestablishes the congressional intent of the Federal Arbitration Act by requiring that agreements to arbitrate employment, consumer, antitrust or civil rights disputes be made after the dispute has arisen. The combined impact of Concepcion and American Express adds urgency for Congress to pass the AFA to enable individuals and small businesses to decide how to resolve disputes. The AFA would not prohibit arbitration, but would simply ensure that it is a voluntary decision made by both parties once a dispute occurs, making pre-dispute binding mandatory arbitration clauses unenforceable in civil rights, employment, antitrust, and consumer disputes. This legislation would allow pre-dispute mandatory arbitration to continue in business-to-business agreements. The legislation would apply to collective bargaining agreements that require arbitration between unions and employers. Its sole aim is to end the unscrupulous business practice of forcing consumers and employees into biased, costly arbitrations by binding them long before any disputes arise, and ensuring an individual’s constitutional rights of access to the judicial system are not waived under coercion.
The ability to access the judicial system is a fundamental civil right. The Arbitration Fairness Act will create a more fair system in which consumers and employees can safely resolve disputes without corporate coercion into arbitration. We urge Congress to pass the Arbitration Fairness Act to protect the legal and civil rights of all Americans.
Thank you for your leadership on this important issue.