Sara D. Davis/AP Images for U.S. Chamber of Commerce Foundation
Staff Sgt. Joseph Kenny and Sgt. Joseph Ricci connect with employers on the online resource Virtual Job Scout, at the Fort Bragg Veterans Jobs Summit, August 13, 2014, in Fort Bragg, North Carolina.
In 1994, Congress passed the Uniformed Services Employment and Reemployment Rights Act (USERRA) with the intention of prohibiting employment discrimination against members of the military, as well as ensuring minimal disruption for service members and their families when they are called for service. In 2003, Congress revised and expanded the Soldiers’ and Sailors’ Civil Relief Act of 1940, thus creating the Servicemembers Civil Relief Act (SCRA). The new law governs treatment of service members in rental agreements, evictions, credit card interest rates, mortgage interest rates, foreclosures, civil judicial proceedings, automobile leases, life insurance, health insurance, income tax payments, and more.
But forced-arbitration agreements inserted into many consumer and employment contracts circumvent those service member legal protections, undermining the very reasons those bills were passed. The result is that large corporations routinely fire service members, foreclose on their family homes, repossess their cars, scam their pensions, and even profit from life insurance policies after service members have been killed, according to a 2018 report by the American Association for Justice. In 2012, the United States Government Accountability Office (GAO) found 15,000 instances of financial institutions failing to reduce mortgage interest rates for service members who qualified for an interest rate cap. And each year, GAO has determined that over 300 illegal foreclosures occur in violation of SCRA.
SCRA violations are criminal, and the statute calls for prison sentences. During the financial crisis, big banks like JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup paid hundreds of millions of dollars in penalties for foreclosing unlawfully on active-duty military members, in some cases while they served overseas. But nobody went to jail, and the arbitration agreements further protect large corporations from liability.
Stand-alone bills such as the Justice for Servicemembers Act would directly address the loophole, ensuring that service members choose for themselves whether or not they go through arbitration. Sens. Richard Blumenthal (D-CT) and Lisa Murkowski (R-AK) have also previously included amendments to the National Defense Authorization Act that mirror the stand-alone Justice for Servicemembers bill.
Today, a group of 31 service members and veterans advocacy organizations sent a letter to leaders of the Senate Armed Services and Veterans’ Affairs Committees, urging them to support the Justice for Servicemembers Act, a forthcoming Senate companion bill, and any NDAA amendments that include the bill’s language.
But organizations that profess to support the military and its members are the most ardently opposed to such reforms.
The Chamber of Commerce touts its “Hiring Our Heroes” program, which helps service members to secure fellowships across an array of sectors and partner companies. Yet in the first quarter of 2022, the Chamber spent $18.6 million in lobbying expenses. Disclosure forms reveal that those activities included lobbying on the NDAA and the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.
On March 3, President Biden signed the sexual assault bill into law. At the signing ceremony, Biden signaled support for broader reforms against the practice. “I know there’s discussion in Congress about whether forced arbitration clauses should also be banned for other kinds of employment disputes beyond sexual harassment and assault. I think it’s all wrong and they should be banned,” he said.
Large corporations routinely fire service members, foreclose on their family homes, repossess their cars, scam their pensions, and even profit from life insurance policies after service members have been killed.
The Consumer Bankers Association, a trade group that includes some of the largest financial institutions, say they support service members through job placement initiatives. The CBA has even supported extending foreclosure protections under SCRA from three months post-service to one year. But their support rings hollow so long as forced-arbitration clauses can circumvent such protections.
The CBA has spent $790,000 lobbying against the Military Lending Act, which currently prohibits banks from requiring service members to submit to forced arbitration and sets a maximum annual percentage rate for loans to military personnel at 36 percent. Their lobbying activities also include issues related to the SCRA.
The Chamber of Commerce and CBA did not respond to the Prospect’s requests for comment.
Last year, on Veterans Day, the American Financial Services Association (AFSA), in a blog post titled “Remembering America’s Finest,” argued that the MLA actually hurts members of the military because reputable lenders are unable to offer small loans below a 36 percent interest rate. The AFSA’s lobbying activities, which so far total $280,000 this year, have included lobbying on the MLA and SCRA’s provisions on “lease termination.” In other words, forced-arbitration clauses.
In a statement to the Prospect, the AFSA distinguished its practices of “traditional installment loan products” from predatory lenders such as payday and auto-title loans. AFSA said the MLA should “clearly target payday lending.”
TO SEE HOW ARBITRATION AGREEMENTS affect service members, consider the case of U.S. Navy reservist Kevin Ziober. By 2018, after ten years in the reserves, Ziober was serving as a lieutenant commander overseeing the training and mobilization readiness of a 130-member intelligence unit based in San Diego.
As a reservist, Ziober hoped that future employers would understand that his military career could necessitate being deployed on short notice for weeks, months, or even years at a time. In 2010, Ziober started working as a manager for BLB Resources, Inc., a federal contractor located in Irvine, California. During a two-year period, Ziober helped grow the company from 18 employees to 90.
But six months into his employment, Ziober recalled in testimony before the Senate Judiciary Committee, BLB asked him and other employees to sign several legal documents, including an arbitration agreement, as a condition for keeping their jobs. Eighteen months later, in November 2012, he received official orders from the Navy that he would be deployed to Afghanistan for one year. Ziober testified that BLB knew for months that deployment was imminent.
On November 30, 2012, Ziober’s last day of work, BLB threw a surprise party in his honor. He said, “There was even a large cake with an American flag decorated in red, white, and blue, with the inscription ‘Best wishes, Kevin.’” After his party, Ziober was summoned for a meeting with the HR director, his supervisor, and what he guessed was a labor consultant or a lawyer. He was told that he would not have a job waiting for him when he returned from Afghanistan.
“The shock of learning that I was being terminated from my job on the eve of my deployment to a combat zone created an unimaginable amount of concern and anxiety about how I would support myself and my family when I returned home,” Ziober testified. “In the course of a few hours, I went from feeling supported, proud, and focused on serving my country, to feeling embarrassed, confused, and concerned about the well-being of my loved ones.”
Ziober’s experience with forced arbitration is why veterans and service members advocate groups have long pushed for an end to the practice.
For advocates like the Veterans of Foreign Wars (VFW), passing the Justice for Servicemembers Act, or seeing its inclusion in the latest NDAA, is about restoring the rights afforded to members of the military under USERRA and SCRA, and allowing individuals to decide for themselves whether they should go to court. On a larger scale, forced arbitration diminishes troop readiness. “Adding stressors is the worst thing you can do to people we send in harm’s way,” said Patrick Murray, a legislative director for the VFW.
Groups like the Chamber of Commerce, AFSA, and CBA proclaim to the public that they support the troops, but critics argue that their lobbying activity actively makes military personnel and their families’ lives worse.
The AFSA told the Prospect that it did not support the Justice for Servicemembers Act or any current and previous versions of the NDAA that include the bill’s language. Instead, AFSA said, “Arbitration has been shown to help consumers, including servicemembers, time and again. It’s faster, cheaper, and has a better track record of relief for consumers than class action lawsuits.”
Forced-arbitration providers are not required to report how many cases are filed, instead only those that are closed, but that number has risen since 2017. Contrary to AFSA’s claims, the success rate for consumers and workers has dropped below five-year averages. In 2020, 4.1 percent of consumers won their cases. And for workers, just 82 individuals, representing 1.6 percent of cases, won a monetary reward through forced arbitration.
As Murray told the Prospect, “I can’t understand a real justification for [forced arbitration]. It’s not better for troops or service members.”
