We live in an era where ‘Terms and Conditions’ pop up everywhere – from downloading a new app to starting a new job. However, in the sea of fine print, there’s one clause that often goes unnoticed, yet holds significant implications: forced arbitration. This article aims to shed light on the dangers associated with forced arbitration and why it’s crucial to understand its implications.

Understanding Forced Arbitration

Forced arbitration, also known as mandatory or binding arbitration, is a legal process typically included in contracts. It requires parties to resolve their disputes through arbitration, rather than through the court system. When parties agree to this clause, they essentially waive their right to sue, participate in a class action lawsuit, or appeal.

The Risks of Forced Arbitration

1. Bias Towards Businesses

Arbitration can be biased towards the organization that drafted the contract, usually a business. It is the businesses that choose the arbitrators, and given that these arbitrators rely on the businesses for their income, there is an inherent conflict of interest that can lean the decision-making process in favor of the business. A study by the Economic Policy Institute found that consumers win only about 9% of the time in forced arbitration.

2. Lack of Transparency

Court proceedings are public, and the reasons for the court’s decision are typically explained in detail. This transparency helps ensure fairness and creates legal precedents for future reference. On the contrary, arbitration proceedings are usually confidential, and arbitrators do not have to provide a legal rationale for their decisions. This lack of transparency can make the process seem arbitrary and potentially biased.

3. Limited Recourse

Once the arbitration decision is made, it is nearly impossible to appeal. Arbitration doesn’t adhere to the strict rules of the legal system, so even if the arbitrator makes a mistake in understanding the law, the decision stands, leaving parties with no or very limited recourse.

4. High Costs

While it’s often claimed that arbitration is less expensive than traditional litigation, this isn’t always true for the individual. In some cases, the individual may bear a significant portion of the arbitration costs, which could include paying for the arbitrator’s time, hearing room fees, and more. These costs can become a barrier to seeking justice for those who cannot afford them.

5. Potential for Class Action Waivers

Many forced arbitration clauses also contain class action waivers, meaning that individuals cannot join together to file a lawsuit. This is particularly problematic for small-dollar disputes where the cost and time to arbitrate would exceed the potential recovery. It allows businesses to avoid accountability for widespread harm or small-scale fraud that would otherwise be checked by class action suits.

The Need for Reform

The dangers of forced arbitration make it clear that reforms are needed to ensure justice and fairness. Proposals have ranged from complete prohibition of such clauses to more transparency in arbitration proceedings, or limiting the scope of these clauses.

Ultimately, as consumers and employees, it’s important to be aware of the implications of forced arbitration clauses. While it may be impossible to avoid these clauses entirely, knowledge about their potential pitfalls can prompt us to support legal reforms and make informed decisions about the products and services we use.

So, the next time you come across ‘Terms and Conditions,’ remember that the fine print does matter. It may be more critical than you think.