Forcing Arbitration Of Federal Statutory Claims

America’s civil law enforcement system largely rests upon private individuals bringing public legal actions to hold violators accountable for breaking the law. Forced arbitration clauses, especially those containing class, collective, and joint actions bans, prevent this vital check from taking place. It is hard to imagine the U.S. Congress passed legislation to protect employees and consumers with the intent that companies could avoid enforcement simply by circulating a smattering of fine print. However, because of the U.S. Supreme Court’s recent interpretations of the Federal Arbitration Act, over 60 million workers (and an untold number of consumers) are forced to arbitrate unscrupulous corporate lawbreaking behind closed doors—often in isolation—when they seek to enforce the rights bestowed by Congress.   

Courts once respected the fact that an arbitrator’s power is limited to the enforcement of contracts, not statutory law. Thus, they rightly limited the reach of the FAA to disputes arising out of a contract between companies engaged in maritime transactions or interstate commerce. In the early to mid-twentieth century, conflicts arising from a contract between businesses, such as a party receiving the wrong goods or being charged too much on a shipment, could be subject to arbitration, but lawsuits brought by employees alleging wage theft could not. Moreover, under the Court’s original understanding of the FAA, the statute was limited to actions brought in federal court under federal law. Because courts applied such a narrow interpretation of the FAA, the need to reconcile federal arbitration law with other federal statutes was rare. When conflicts did arise, a court would apply the normal rules of statutory construction, examining the legislative text and the congressional intent behind each law and attempting to harmonize the two. Only in cases where a court found the two federal statutes irreconcilable would it render one the “winner” over the other (and even then, courts would try to limit the effect of the finding to preserve Congress’ will to the greatest extent possible).

Beginning in the 1980’s, the Court adopted a radical new approach to the FAA that allowed arbitrators to issue binding decisions on disputes involving people’s statutory rights. In a handful of years, the Court erected an entirely new adjudicatory framework upon which our civil justice system now hangs that allows companies, with astonishing frequency, to cut out the American judiciary almost entirely. For-profit arbitrators now have the authority to issue non-appealable final decisions on statutory claims despite the fact that their power is not judicial in nature. Based on the Court’s declaration of a “national policy favoring arbitration” that trumps nearly all other civil law concerns, absent a “contrary congressional command,” nearly all statutory claims can now be forced into arbitration.

A recent study found that up to 722,000 employment law claims go unfiled each year because of forced arbitration. No one knows how many consumer claims, anti-trust claims, or other civil law violations are snuffed out by corporate fine print, but a reasonable guess could place it in the millions. That’s millions of times each year that companies get away with flouting the law and harming employees, consumers, and small businesses for personal gain; millions of times companies are unjustly enriched by their own wrongdoing; and millions of times they are incentivized to keep breaking the law because there is no meaningful way for a harmed party to stop them. This is what has come of Supreme Court jurisprudence allowing companies to isolate consumers and workers in arbitration when they seek to enforce the rights afforded to them by Congress.  

This timeline, beginning in 1953, shows how the Court has gone from fiercely defending a plaintiff’s ability to enforce their legal rights in a public court to fabricating a barrier between harmed plaintiffs and the courthouse doors.

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