The Chamber Speaks: Forced Arbitration Is Actually Good for Workers!

AP Photo

Happy 14-year-old worker enjoys forced arbitration, no lunch.

When members of Congress try to legislate in a bipartisan manner based on the merits, experts appearing before them should give information that is intellectually honest and aboveboard. Unfortunately, a recent report on arbitration by a U.S. Chamber of Commerce affiliate is anything but.

In an era of hyperpartisanship, lawmakers on both sides of the aisle nonetheless appear to be interested in addressing the harm caused by forced arbitration, the practice of forcing workers to give up their access to the court system to resolve grievances with their employers. These shared concerns started with the #MeToo movement: last year, every state attorney general signed a letter calling on Congress to end forced arbitration in sexual harassment cases. In 2017, Senators Lindsey Graham (R-SC) and Kirsten Gillibrand (D-NY) jointly proposed legislation to void arbitration agreements in such cases, which was reintroduced in the House, though not the Senate, this year. Legislators’ concern about all forms of forced arbitration in the workplace has also been growing. In April, the Senate Judiciary Committee, which Senator Graham chairs, held a full committee hearing on arbitration’s impact on workers, consumers, veterans, and others; last month, the House held a hearing as well.

Bipartisan commitment to a good and important cause is great news, but to achieve reform in the context of a split government, it’s necessary to account for the needs of workers as well as the interests of business. In that context, the report issued by the Chamber Institute for Legal Reform should have been a welcome addition, an effort to engage with the issue from the Chamber’s perspective. Instead the report (entitled “Fairer, Faster, Better,” with a race car on the cover) is riddled with analytical flaws so glaring that the report concludes that arbitration is better for workers. The serious deficiencies of this report must now be highlighted in order to re-establish common ground for reform to progress.

The first fatal flaw in the Chamber Institute report is in its basic methodology: It compares the results of individual employment arbitrations—never specifying whether they are voluntary or forced—with the results of litigation from 2014 to 2018, using publicly available federal court data and the limited publicly available data from the two main arbitration associations (the AAA and JAMS). But the report fails to include class actions and state court lawsuits in its litigation data. Class actions are one of the most important vehicles for workers to assert their rights, resulting in significant recoveries for workers. Omitting some of the largest-scale workers’ rights litigation results in a deeply biased sample, as does the omission of state court cases, which have been found to be more favorable to employees than federal court cases or arbitration. Without a rigorous assessment of the impact of these omissions on their results, the report’s findings comparing litigation and arbitration are meaningless.

Additionally, the report’s own numbers point to one of forced arbitration’s biggest problems: It prevents workers from ever bringing cases in the first place. The report examines over 10,000 arbitrations and over 90,000 litigations. But more than half of all private-sector workers are subject to forced arbitration, so the number of arbitrations and litigations should be roughly the same. The gross imbalance in this data set shows what one scholar called “The Black Hole of Mandatory Arbitration”: A great number of workers are dissuaded from submitting claims to forced arbitration, for various reasons, including difficulty in finding an attorney willing to bring a case in arbitration, and perhaps also workers’ sense that they’re unlikely to get results because they believe the process is rigged.

Moreover, the Chamber Institute report claims that workers win more money on average in arbitrations than in court. However, focusing on the average, or mean, is highly misleading here, because the data includes one highly unusual arbitration case with a $16 million award (which also appears to be double-counted in the AAA data), skewing the average award significantly upward. The more relevant figure—not included in the report—is the median award, which is a much better measure of what plaintiffs in arbitration typically receive. Similarly, the report misleadingly focuses only on the mean in assessing the relative speed of arbitrations versus litigation. What’s the difference between the median—that is, the typical—time period of arbitration and that of litigation? A mere nine days.

Also, the report only says how much employees were awarded, but not how much they sought in the first place. To truly assess the effectiveness of arbitration versus litigation, it’s important to know what percentage of their original claims workers actually recover. In addition, the report—while noting that most cases settle—doesn’t discuss whether employee settlements are higher in one or the other group, a serious problem given that the threat of a trial likely results in higher settlement figures.

And really, how do you measure the success of worker claims? Ideally, based not only on monetary recovery, but, more fundamentally, also on the impact on the employer’s practices—did the employee’s case result in changed conduct and ongoing compliance with the law? The report doesn’t discuss this, but given arbitration’s secretive nature, it’s a fair bet that open court is better in this regard.

Finally, glaringly absent from the report is any discussion of highly regarded prior studies on this topic. Alex Colvin, the Martin F. Scheinman Professor of Conflict Resolution at Cornell University,is a national expert on empirical studies of arbitration, having authored a number of articles on the subject. A 2015 Economic Policy Institute report summarizes his and others’ research going back nearly two decades, including findings that while arbitration is indeed faster than litigation, workers win much more frequently in court than in arbitration, and when they win, they win a lot more money.

A credible report on any topic would cite and discuss relevant previous studies, especially any with contrary results. Instead, the Chamber Institute’s report misleadingly states, “[T]here have been few empirical studies of the arbitration process,” as though years of widely disseminated studies written by a Cornell professor and numerous others simply don’t exist.

Does all of this amount to cooking the books? At the very least, the burner’s on a medium simmer, since all the paper’s flaws discussed here (plus others that are more wonky and in the weeds) point in the same direction: making arbitration look better for workers than it really is. Which brings us back to the starting line, with our “fairer, faster, better” bright yellow arbitration race car, which in the end is more Matchbox than Maserati.

The Chamber Institute presumably produced this report in response to the widespread and growing opposition to forced arbitration, as seen in walkouts by Google employees and protests by everyone from Harvard Law students to video game designers. There’s also that bipartisan movement on Capitol Hill, along with overwhelming public sentiment in favor of holding corporations responsible for wrongdoing, and of giving people their day in court.

In last month’s House hearing, a lieutenant commander in the Navy Reserve described his experience: He was fired from his private-sector job on the eve of—and seemingly because of—his deployment to Afghanistan. When he returned, he was forced into arbitration and denied access to court. Other hearing speakers sketched a similar picture. Who could possibly think this is fair?

The framing of the Chamber Institute report shows that even the nation’s corporate interests know they’re fighting a losing battle. Instead of their usual arguments—that arbitration is better for business or reduces cost—they are reduced to disingenuously arguing that it helps workers.

Our elected leaders and the public deserve more honesty and more credit. The Chamber Institute’s report strains credulity. More importantly, all you have to do is scratch the surface to see that its authors simply don’t have the proof. Congressional leaders should disregard this unreliable report, and should pass legislation to make sure that hardworking people can still seek justice in court.

You may also like