What Is Forced Arbitration?

Ideally, as responsible consumers, we all read important documents we receive before signing them. Realistically, many of us simply scan, while others navigate their attention straight to the signature like. Even in the technological context, how many consumers actually read all of the terms and agreements associated with our services before accepting them?

This is a sobering form of negligence that many unknowingly practice, binding them to contracts with information no one truly knows. Forced arbitration takes advantage of this tendency by introducing clauses into legal documentation that most overlook.

What Is Arbitration?

Arbitration is a method of settling disagreements between two parties. Like mediation, arbitration is conducted outside of the courtroom. In this process, both parties present their case to a professional, court-appointed arbitrator. The arbitrator considers both parties’ evidence and comes to a conclusion about the case ruling. One downside to the arbitration process is that it’s often biased, with the arbitrator not taking all valid evidence and facts into consideration. This often occurs when the court forces one unwilling party into arbitration with another willing party.

What Is Forced Arbitration?

Forced arbitration occurs when a company or business inserts a clause dismissing themselves of legal charges the individual signing could press into a contract. Instead of having the right to sue, the individual unknowingly agrees to enter binding arbitration by signing the contract. This waives their right to seek legal recourse, extending to class action lawsuits. In fact, this individual cannot even appeal the forced arbitration.

Who Uses Forced Arbitration?

This practice is common among all types of corporations and businesses. Product manufacturers, scammers, and everyday workplaces utilize forced arbitration to cover themselves if they happen to make a mistake. For example, an individual’s workplace might prevent them from suing the establishment for instances of discrimination. Manufacturing companies might introduce clauses that prevent consumers from suing for defective or dangerous products.

What Implications Does This Possess?

Forced arbitration always leaves the employee or consumer without any choice. By signing a contract with a forced arbitration clause, you leave your fate in the hands of the arbitrator. In many cases, the biased arbitrator pushes the case in favor of the business or organization in question. But, why is this?

Oftentimes, the company involved has already formed some sort of client-based relationship with the arbitrator. According to New York Times, arbitrators have historically manipulated and/or ignored the law. Both Alliance for Justice and the Consumer Financial Protection Bureau support this assertion through investigation, finding that arbitrators rule in favor of companies and businesses over consumers/employees 93% of the time. This is a serious form of corruption that is prevalent in almost every industry.

Is It Illegal?

Forced arbitration is not illegal. In fact, it has become hard to avoid instances of forced arbitration. Most credit card companies, hospitals, and employers utilize this tactic to prevent legal repercussion on their end. This is horrific considering signing a contract, or employee handbook is necessary to secure employment. In tight pinches, one must choose between securing a potential form of income and not becoming a victim of forced arbitration. Sadly, many individuals that are desperately seeking a job feel as if they have no other choice.

Forced arbitration is a common occurrence. Before signing your name on the dotted line, make sure to read the documentation in front of you. Whether it’s through technology or in a workplace contract, its best to check if you’re signing away your rights as an employee or consumer before providing your signature. Though it might take some time, comb through all forms of documentation presented to you to ensure that you are not being taken advantage of.