The Arbitration Epidemic

Originally published in the New Jersey Law Journal, November 30, 2018
In a recent Editorial, the New Jersey Law Journal extolled the virtues of the arbitration process to resolve disputes for both consumers and employees.  Let’s be clear:  Mandatory Arbitration deprives workers and consumers of their rights, most importantly their constitutional right to have their disputes decided by a jury of their peers.  While the Federal Arbitration Act has been law for decades, the misnomer advanced by some attorneys and the Editorial Board is that it is somehow favored over the Constitutional Right to a Trial by Jury.  It is not.  Its goal was to correct the refusal of courts to enforce arbitration awards.  New Jersey, as other states, has the right to subject arbitration awards to ordinary contract principles.  This is exactly the reason why the Flanzman Case was correctly decided.

During the past three decades, the Supreme Court has engineered a tremendous shift in the civil justice system that is having unfortunate and dire consequences for consumers and employees.  The Court has enabled and has in many ways encouraged corporations to force customers and employees into arbitration to adjudicate practically all types of alleged violations of state and federal laws designed to protect against consumer fraud, unsafe products and discrimination.  This has the unfortunate result of preventing those who have been aggrieved of either pursuing their matter or having a single arbitrator render a decision that too often, benefits the large corporations.  It is bad enough that our society is becoming more and more polarized between the “haves” and the “have nots”.  Now, the corporations that are wielding more and more power are controlling the playing field to the detriment of consumers, customers and employees.  There have been countless studies and reports detailing how mandatory arbitration benefits large corporations:

     1. In many situations a mandatory arbitration clause is buried in an offer of employment which forces employees to arbitrate all disputes they may have with their employer.

     2. Employees subject to mandatory arbitration can no longer sue for violations of many important employment laws, including rights to minimum wages, and overtime pay, protections against discrimination and unjust dismissal, family leave and a host of other employment rights.

     3. On average, employees and consumers win less often and receive much lower damages in arbitration than they do in Court.

     4. Employers tend to win cases more often when they appear before the same arbitrator in multiple cases, which is often the case.

     5. Arbitration often restricts the right to obtain detailed discovery. It is this discovery that often reveals that the corporation has a history of discriminating.

     6. Arbitration is often more costly for the employee than litigation as the arbitrator must be paid and often charges exorbitant rates. While there may be certain filing fees in State and Federal Courts, access to those Courts and the jury process is much less costly.  This clearly benefits the large corporation.

There are countless other benefits to the Corporation. From a simple logic standpoint, why are Corporations so intent on arbitrating matters?  Is it to create a level playing field?  Or is it to keep more money in their coffers while at the same time, making sure that employees do not uncover unlawful and discriminatory practices?  The answer is obvious.

The Seventh Amendment to our constitution guarantees everyone a right to a Jury Trial.  Corporations continue to wield more and more power in our society.  Let’s make sure that consumers, customers, and employees are able to play on a level playing field with them.

Evan Goldman

Evan L. Goldman is a partner in the firm of Goldman Davis Krumholz & Dillon in Hackensack N.J. He is also a Certified Civil Trial Attorney and is currently the President of the New Jersey Chapter of the National Employment Lawyers Association.