Lawyer: Employers Should Take Away Workers’ Right To Sue; Arbitrators “Know Where Their Bread & Butter Comes From”

Image courtesy of SarahMcGowen

The Consumer Financial Protection Bureau is currently working on rules to stop banks, credit card issuers, and others from forcing customers to sign away their right to a jury trial. Opponents claim that this change will only benefit trial lawyers, but some candid advice from one lawyer shows exactly why these protections are needed — and who really stands to benefit.

As we’ve covered before, forced arbitration is the practice of requiring a consumer to agree to have all legal disputes with a company resolved outside of the courtroom through private arbitration.

READ MORE: 87 Companies that are using arbitration to take away your right to sue.

More importantly, most arbitration clauses also have a so-called go-it-alone condition that prohibits the customer from joining with similarly wronged customers in a class action, even in arbitration.

Pro-arbitration organizations like the big banks — 90% of which take away the customer’s right to a jury trial — and the U.S. Chamber of Commerce have argued that class actions don’t pay, and that only class action trial lawyers make money.

What they gloss over is how imbalanced the arbitration scales can be in favor of the company. First, very few individuals understand the arbitration process or are willing to go through with it, given the cost and limited possible reward.

According to CFPB data, between 2010 and 2012 a total of 1,847 individual arbitration disputes were filed involving the entire banking, credit, and financial industries. Compare that to the 25 million Uber customers who look to eventually share in the settlement over the company’s “Safe Rides” fee. Can you imagine more than a few dozen Uber customers going through arbitration to recover a few dollars?

Second, some arbitrators may have a bias in favor of the companies and the lawyers they repeatedly see, as opposed to the random plaintiff consumer they may only see once (if at all; some arbitrations are handled via teleconference, or just by document review).

This isn’t just guess work or theory. Pro-arbitration lawyers have effectively admitted that some arbitrators may be biased.

In this this recent Orange County Register article about California’s equal pay rules, one local labor lawyer explains that he advises his clients to make their employees sign arbitration agreements, thereby preventing them from being able to sue if/when they have a legal dispute over their wages.

But here’s where he brazenly admits that things are tilted in his favor:

“People question whether arbitration tends to favor employers,” the attorney told attendees at a recent human resources conference. “I believe they do. I use the same arbitrators over and over, and they get paid when I pick them. They know where their bread and butter comes from.”

In other words, he is telling employers: Get your employees to sign away their right to a jury trial so that you can play fast and loose with a law you don’t like. And if you do have to go into arbitration, don’t worry because this arbitrator knows who pays his bill.

His words seem to answer a big question left unanswered during a 2013 Senate hearing on arbitration. At the time, Sen. Al Franken (MN) asked a pro-arbitration law professor about a statement he’d previously written that arbitrators attract cases by developing reputations of being friendly to businesses. The professor deflected, and commented that “there are instances in which the civil litigation system leaves people disappointed too.”

Keep in mind that arbitration rulings are generally final. In fact, the 2008 Supreme Court ruling in Hall Street v. Mattel concluded that the legal system can’t get involved in fixing a bad arbitration decision, even when there was a clear legal error that should have resulted in a different outcome for the arbitration.