Mandatory-Binding Arbitration Swindles Consumers and Employees of their Rights

As Congress nears their Holiday break, consumer advocates and GTLA remain hopeful about a bill authored by Georgia’s Congressman Hank Johnson and Wisconsin Senator Russ Feingold amending the Federal Arbitration Act.

Countless corporations and companies put a mandatory-binding arbitration clause into their consumer and employee contracts that disallow a defrauded or abused employee or consumer the right to a jury trial—a right guaranteed by the 7th Amendment of our Constitution.

A recent article in Mother Jones magazine about this consumer issue provides several examples of how this affects consumers. The author of the article and her husband had attempted to a buy a used-car. After finding one to suit their needs, they perused the contract. They were surprised to find out that if they had signed on the dotted-line they would not have only purchased a car, they would have signed their Constitutional Rights away if it turned out that they were defrauded by the dealership. Perhaps the car had been totaled by its previous owner; perhaps the car was a lemon.

The couple would have been forced into mandatory-binding arbitration, a costly and in some cases, it can be argued, biased process favoring corporations, leaving them stuck with the result. Unlike our modern court system which allows one side or the other to appeal to a higher court if one feels like they did not receive a fair shake, mandatory-binding arbitration is a one-time deal.

The article provides several other examples of this corporate practice. The restaurant Hooters only hires women after they sign a clause that says they cannot go to a jury for a claim of sexual harassment. Halliburton and the pharmaceutical company Pfiser employ a mandatory-binding arbitration clause in their contracts.

Support from both sides of the aisle has been garnered because of a particularly egregious area that mandatory-binding arbitration can be found—nursing homes. Families trust the facilities to care for their aging parents. Sadly, stories abound of nursing home abuse and neglect. To circumvent a family taking the facility to court over abuse, many nursing homes put into their contracts the mandatory-binding arbitration provision, prohibiting a family to seek justice on behalf of an abused loved one.

The amending of the Federal Arbitration Act would get rid of the mandatory-binding arbitration clauses in employment and consumer contracts. Arbitration would still be an option, if both parties agreed, but so would the Constitutional right of a trial by a jury of one’s peers—a right that GTLA supports and acts to preserve as it is a bedrock of this nation’s foundation.