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Library - Consumer Rights
Consumer Protection
IS ARBITRATION FAVORABLE TO CONSUMERS
& EMPLOYEES?
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Q:
As
a consumer who signs agreements in connection with a
credit card or cell phone application, I see the term
“arbitration” all the time. I even see it in some
employment contracts. I heard that arbitration is good
for the consumer or employee since it will save money
and time. Is this true? Is arbitration really better for
consumers and employees? |
A:
Generally, arbitration is not
advantageous to consumers or employees. In fact, the evidence
gathered so far by several consumer advocate groups, indicate that
arbitration favors the business or company rather than the consumer.
Arbitration is a procedure to
resolve
disputes without bringing a lawsuit, where the disputing parties
refer the dispute to a third party (the arbitrator) who reviews the
case and makes a decision that is legally binding on both sides. By
agreeing to arbitration, the consumer waives his right to have a
judge or jury decide the case.
Arbitration is most commonly used
in commercial disputes (where the disputing parties are all business
entities). The use of arbitration is far more
controversial in consumer and employment disputes (where one party
is a business and the other is an individual). Arbitration in a
consumer or employment situation is not usually the product
of negotiation but is practically imposed on consumers or employees
through contract provisions.
Big businesses
claim that arbitration is a cheaper alternative to filing a lawsuit.
However national studies indicate that in consumer disputes,
the high fees associated with mandatory arbitration make it
difficult for consumers to vindicate their rights. Most arbitration
providers require hundreds of dollars in filing fees. Thousands
more are to be advanced for the arbitrator’s daily or hourly fees.
In employment disputes, however, California law requires that
arbitrator’s fees be paid for by the employer.
The biggest
downside to consumers though is the waiver of their right to jury
trial. Unlike jurors who make independent decisions in trial,
arbitrators naturally want repeated business from employer or
corporate entities. Hence, some arbitrators may find it hard to
rule or award significant damages for consumers and employees.
The bias
towards companies is practically built into the system. Elizabeth
Bartholet, a law professor at Harvard and arbitrator with the
National Arbitration Forum (NAF), was removed from arbitrating on
her remaining cases when she ruled against a credit card company and
sided with a consumer. Bartholet said that arbitrators know fully
well that if they rule against corporations too often, their income
will dry up.
Consumers and
employees also rarely win in arbitration. A review of 34,000
recorded arbitration cases in California revealed that consumers
lost 94 percent of the time. Even the arbitration industry agrees
that corporations win most of the time. The bottom line is consumers
have a greater fighting chance in the courtroom than in arbitration.
The ultimate
consequence of agreeing to an arbitration provision lies on the
individual’s inability to seek redress from the courts. Consider the
tragic story of Jamie Leigh Jones:
Jamie was a
20-year-old Halliburton employee in 2005 when she was sent to work
in Iraq. While there, she was repeatedly raped, mutilated and
disfigured by fellow employees within the company premises. The
Department of Justice apparently refused to investigate the matter
criminally. Because she cannot have her day in criminal court, Jamie
wanted to sue the company in civil court. Unfortunately, she was
told by the company that any dispute with the company, even one
involving charges of rape, must go to arbitration.
Four years from
the day of her assault, Jamie is still uncompensated for her
damages. She is currently asking the court for the right to sue her
employer. Whether she will be allowed to do so is uncertain.
©
Law Offices C. Joe Sayas, Jr.
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