Vox recently had a great article focusing on Republican support to limit the scope of mandatory arbitration agreements. In fact, Senate Republicans held a committee hearing last month on corporate America’s alarming abuse of mandatory arbitration clauses, a business practice that requires workers and customers to waive their right to sue the company. Millions of Americans have unknowingly signed or accepted these contract clauses, in which they agree to take legal disputes to private arbitration — a secretive legal forum with no judge, no jury, and practically zero government oversight.
Consumer advocates and labor groups have long opposed forced arbitration, but now several Republican senators are showing new concern about the arbitration system, and seem willing to work with Democrats to fix it. Sen. Lindsey Graham (R-SC), the chair of the House Judiciary Committee, is one of those arbitration skeptics. He said he scheduled the committee hearing on the topic to discuss the alleged benefits and obvious drawback of this private legal forum, so senators can “develop some solutions.” “I want to be pro-business, but everything that’s good for business may not be the best answer for society,” Graham said during his opening remarks. “In 2019, I want to look long and hard on how the system works; are there any changes we can make?”
A few Republican senators on the committee, who are also lawyers, shared similar concerns, suggesting that arbitration reform may be one of the rare issues in Congress that could lead to a bipartisan compromise.
“What’s really happening is that our judicial system is getting privatized,” David Gottlieb, an employment attorney in New York who often represents workers in arbitration. “It’s being privatized in a way that really only favors one side, the employer.”
The guests invited to testify at the Senate hearing on arbitration included the usual suspects: lawyers aligned with big businesses, an academic expert, and consumer rights advocates. But the inclusion of two unexpected witnesses — a US Navy reservist and a restaurant owner — signals that GOP leaders want to show the impact of arbitration on two of their traditional constituencies: military service members and small business owners.
Kevin Ziober, the Navy reservist, said he had “no choice” but to sign an arbitration agreement when managers at a California company presented one to him after he was hired in 2010. Ziober didn’t want to lose his job so he signed it. Then in 2012, the company fired him the day after he deployed to serve 12 months as a reservist in Afghanistan. He tried to file a lawsuit against the company for violating a federal law that requires employers to hold a job for reservists who are deployed. But because he had signed an arbitration clause, a federal judge ruled that he would have to resolve his complaint in private arbitration.
In taking his case to arbitration, Ziober said he felt completely disempowered:
I would have no access to a federal judge nominated by the President and confirmed by the Senate, I would lose my Seventh Amendment right to a jury trial, I would lose any meaningful right to an appeal, and I would lose my right to a public proceeding of any kind. Along with other servicemembers, I have fought to advance American ideals and values abroad, so it was particularly disheartening to lose these fundamental rights at home.
After hearing his testimony, Sen. Joni Ernst, a conservative Republican from Iowa, seemed sympathetic.
“I am very sorry to hear about what happened to you. You went to serve our country and our country didn’t protect you,” said Ernst, who served in the Army National Guard. “If you had been allowed to litigate your claim in federal court, do you believe you would have been better protected?”
Ziober said that at the very least, public access to the court system would have allowed his case to raise awareness about the pitfalls of arbitration clauses.
“My voice will basically be silenced,” he said. “ Service members who could benefit from this will never learn from it.”
Alan Carlson, a restaurant owner in Oakland, California, told lawmakers he was “shocked” to find out that he had signed an arbitration agreement in his contract with American Express. The point of the contract was to let customers pay for their meals with the popular credit card, and American Express would charge the restaurant a small fee for each transaction. Carlson said he grew frustrated with American Express and tried to sue the company for its strict rules on business owners. But a lawyer told him it was not worth the cost to challenge a giant company like American Express.
“This cost-prohibitive system means that there is no way one small business can get justice done,” he said during the hearing. “I believe this is un-American.”
Democrats in Congress want to make arbitration optional, not something forced upon consumers and workers. For example, if an employee believes a company owes her money, she can decide to take their claim to court, or in arbitration.
In October 2017, then-Rep. Beto O’Rourke (D-TX) introduced the Mandatory Arbitration Transparency Act, which prohibits businesses from including a confidentiality clause in their arbitration agreements related to discrimination claims. That December, a bipartisan group of senators and representatives introduced the Ending Forced Arbitration of Sexual Harassment Act, which exempts sexual harassment cases from required arbitration.
Then in March 2018, Sen. Richard Blumenthal (D-CT) and a group of Senate Democrats proposed an even better idea: Don’t let businesses force employees and consumers to take their claims to arbitration. Their bill, the Arbitration Fairness Act, would let workers and consumers decide where to pursue their legal claims. They reintroduced the bill in February, which is now called Forced Arbitration Injustice Repeal Act. It has broad Democratic support, with 172 co-sponsors in the House and 34 in the Senate. But so far, Republicans have not signed on.
The fact that Lindsey Graham organized a committee hearing on the topic is promising and opens the door to possible negotiation. Graham didn’t say what policy changes he would support, but said he was determined to “find a solution.”
Ziober, the Navy reservist who testified on Tuesday, appealed to that sense of bipartisanship.
“Though I have been a registered Republican for the vast majority of my life, I want to see our elected leaders find common ground to protect the rights that make our lives better —like consumer protection, civil rights, and veterans’ rights,” he said.