Confirming my long-held belief that arbitration is a totally rigged system of “justice,” the Washington Post reported today that in employment arbitrations during 2020, employees were awarded damages just 1.6 percent of the time. During this same time period, forced employment arbitrations skyrocketed.
Employment arbitration is a confidential and binding process in which companies force employees to have their claims heard. The employee’s case is determined, not by a jury or a judge, but by a biased third party (an “arbitrator”). In California, that arbitrator is bought-and-paid-for by the employer.
Unsurprisingly, studies have confirmed time and again that arbitration leads to more favorable outcomes for companies. This is because it is rigged. How? Employers incentivize the arbitrator to find for the company because the employer is likely to choose same arbitrator repeatedly – and especially one that finds in the employer’s favor. And, if the arbitrator does not, the employer can target the arbitrator’s business by refusing to use him or her in the future.
On the other hand, because it is rare that an employee will ever arbitrate multiple cases – let alone multiple cases before the same arbitrator – an arbitrator is less likely to find in favor of the employee. In other words, the arbitrator can find against the employee without fear of being put out of business. This bias in favor of employers is called the “The Repeat Player Effect.”
Further stacking the deck against employees, a final arbitration judgment is rarely appealable. Arbitration also has the direct effect of depriving other employees of evidence because nothing about arbitration is public. As today’s Washington Post article reminds us:
Forced arbitration is a black hole that operates outside the bounds of any enforceable standards . . . .”
The House Judiciary Committee is currently considering the Forced Arbitration Injustice Repeal (FAIR) Act, which would forbid forced arbitration. The passage of this law would enable employees – many of whom are low-wage workers and industries with large numbers of female and Black employees – to regain access to the justice system so they can have their cases heard by a jury of their peers.
