While consumers continue to struggle to safeguard their civil rights in the legislature and the courthouse, corporate America has found a new way to attack these rights by slipping mandatory arbitration provisions in consumer, health care, insurance and employment contracts as a condition to either obtaining consumer services or employment.
Examples appear to be happening nationwide. In some states, car dealers are requiring consumers to sign mandatory arbitration clauses in order to purchase an automobile. Health care providers and physicians are requiring patients to sign mandatory arbitration clauses before providing health care treatment. Many employers are including, in fine print of employment manuals, that any employee disputes (i.e. age discrimination, sexual harassment) will be handled through mandatory arbitration. Credit card companies are requiring mandatory arbitration in any disputes, and some earnest money contracts, for the purchase of real estate, include language requiring mandatory arbitration in the event problems from the real estate purchase ensue. Unions are bargaining away third party rights in exchange for lower health care premiums.
Consumers, however, are recognizing that these mandatory arbitration provisions completely circumvent the civil justice system and leave consumers with inadequate protections and little recourse. In Alabama, a suit has been filed seeking a declaration that the Alabama Department of Insurance illegally approved an insurance policy form that permits insurance companies to include a mandatory arbitration provision. This form was approved by the Insurance Department in the absence of public hearings or making any disclosure to policyholders and after the previous Insurance Department head concluded that the form was illegal under Alabama law.
Opponents of arbitration are particularly concerned that mandatory arbitration contracts are being abused by Corporate America because consumers are likely not meaningfully consenting to them. Consumers are either being told by employers or corporations to sign the agreements or they will not be employed or be able to receive services, or the contracts are being slipped into employment contracts or employee manuals without their knowledge. There is a great deal of state court precedence that individuals are not deemed to have waived their constitutional right and access to our civil justice system when the waiver was not made voluntary, knowingly and intelligently.
Opponents also argue that because arbitrators often don't write out and justify the reasoning behind their decisions and because the process is often confidential, public discussion is dissuaded. In addition, arbitrators don't have the authority to force corporate wrongdoers to change their discriminatory or harmful behavior. Arbitration decisions don't foster a "deterrent message" to the corporations because arbitrators don't follow legal precedent and decisions are on a case-by-case basis.
Mandatory arbitration schemes are inherently unfair because they require individuals to waive away their rights before a dispute arises. Arbitration contracts can only be made fair to consumers if they meaningfully and knowingly agree to arbitration after a claim has arisen. Mandatory arbitrations schemes are not an acceptable alternative to our civil justice system and corporate America should not be allowed to force individuals to sign away such fundamental rights as access to our civil justice system.
Republished with permission of the Association of Trial Lawyers of America.