Employees at Google recently organized a phone drive to lobby Congress to end the practice of mandatory or forced arbitration, in which an arbitrator — typically designated by the company — resolves a legal dispute, rather than a judge.
Over the last three decades, more and more corporations have forced their employees or customers to sign these contracts, agreeing to take their disputes to private arbitration instead of to court. A recent study estimates that currently more than 60 million U.S. workers signed these mandatory arbitration agreements when they were hired. Another found that, last year, consumers signed almost three times as many consumer arbitration agreements as there are people living in the U.S.
Arbitration’s spread has become controversial. Many on the left criticize it, while many conservatives support it. So it may be surprising that liberal reformers were the first to make arbitration popular. Here’s how the Supreme Court and Congress helped change arbitration from a liberal cause to conservative rallying cry.
Businesses win — and employees lose — more often in arbitration than in court
Arbitration produces clear winners and losers. Employees win less frequently and receive lower damages in arbitration than in litigation. Employers win more frequently, especially if they use the same arbitrators repeatedly. That’s hardly surprising, given that the employers typically choose the arbitrators. Given recent public criticism, many prominent companies have discontinued mandatory arbitration requirements for sexual harassment claims.
The Supreme Court has helped expand private arbitration. Just last week, in Lamps Plus, Inc. v. Varela, conservatives decided that workers cannot join to bring similar complaints against a company through class arbitration unless their contracts specifically allow it. The 5-4 majority opinion relied heavily upon a controversial case from last term, Epic Systems Corp. v. Lewis.
These cases are just the latest in a three decades-long trajectory toward disallowing anything that discourages private arbitration, as part of a larger political strategy employed by business-friendly conservatives in Congress, the courts, and the private sector to constrict both access to courts and class-action lawsuits.
Online labor markets may look competitive. They aren’t.
But arbitration used to be a liberal cause
Arbitration is neither a new nor a conservative innovation. Progressive-era liberal reformers promoted it as a less costly, more efficient and fair alternative for those who struggled in traditional courts. Business and trade associations also supported it at the time, seeing it as a simpler way to handle minor disputes.
By the 1930s and 40s, the federal government began to use arbitration to facilitate collective bargaining and resolve disputes between unions and employers. These joint interests prompted Congress to pass the Federal Arbitration Act in 1925, in which it directed courts to uphold arbitration contracts, with some exceptions.
So how did arbitration change?
How did arbitration — originally conceived as a cheaper alternative to courts that was better for everyone — become the forced arbitration of today? Congress helped shift arbitration from a form of justice-enhancement to a process that, in practice, shields large institutional defendants from liability. And Democrats and Republicans were both involved.
While the story is long, after the civil rights era, conservatives began to see arbitration as a possible remedy to their concerns about substantive employment rights statutes and their liberal reception by the courts. Title VII of the Civil Rights Act of 1964, like later laws such as the Age Discrimination in Employment Act and the Americans With Disabilities Act, contain private rights of action that explicitly allow — even encourage — individuals to litigate to enforce these rights by going to court.
Some Democrats continued to promote arbitration, but others worried that it would become a second-rate system of justice, used to protect corporations. Sen. Edward Kennedy, for example, defended arbitration, while consumer rights advocate Ralph Nader strongly opposed it. Republicans and the Democrats who continued to support arbitration wrote and passed bipartisan bills in the 1980s and 90s that entrenched arbitration’s broad use.
But in 1991, three events decisively shifted attitudes toward arbitration, leaving conservatives as its chief advocates. Anita Hill’s testimony before the Senate Judiciary Committee roused liberal support for ready access to litigation to enforce rights against workplace harassment. A landmark Supreme Court decision that year compelled an employee to follow his employer’s rules and accept arbitration for his age discrimination claim instead of heading to court. Finally, conservatives managed to add a pro-arbitration clause to the Civil Rights Act of 1991, a law better known for encouraging litigation by increasing damages and attorney’s fees.
Europe hit Google with a 10-figure fine. Again.
That’s when forced arbitration began veering away from the progressive vision of what arbitration could be. In the early 1900s, the legal community had resisted arbitration, afraid that it would reduce judges’ authority and compromise courts’ procedural protections for all, leading to unfair outcomes that courts could not review. Their position — both then and now — was that arbitration should remain voluntary, not mandatory. Until the 1980s, courts interpreted the law in keeping with its legislative history and with the scholarly consensus that the use of arbitration is premised on consent.
Cue the Supreme Court
Since then, however, the Supreme Court has developed a dramatically different conception.
Its conservatives helped tilt dispute resolution away from litigation and toward private arbitration, and they are unlikely to reverse course. Arbitration has become an entire industry. States largely cannot reform it. President Barack Obama issued executive orders to limit its use, which President Trump promptly undid. As Justice Ruth Bader Ginsburg noted in her dissent to last week’s decision, and as Google activists are emphasizing, arbitration’s future is back in the hands of Congress — where it began.
Sarah Staszak is an associate research scholar in the Woodrow Wilson School of Public and International Affairs at Princeton University and author of “No Day In Court: Access to Justice and the Politics of Judicial Retrenchment” (Oxford University Press, 2015) and “Privatizing (In) Justice: Arbitration and Litigation Reform in the U.S.” (under contract, University of Chicago Press).