The growing use of mandatory arbitration

Source: Alexander J.S. Colvin, Economic Policy Institute, April 6, 2018

Access to the courts is now barred for more than 60 million American workers.

This is an expanded version of a report originally published in September 2017. The report now includes data on mandatory arbitration by employer size, state, industry, gender, race, average employee wage, and typical employee education level.

From the summary:

In a trend driven by a series of Supreme Court decisions dating back to 1991, American employers are increasingly requiring their workers to sign mandatory arbitration agreements. Under such agreements, workers whose rights are violated—for example, through employment discrimination or sexual harassment—can’t pursue their claims in court but must submit to arbitration procedures that research shows overwhelmingly favor employers.

In reviewing the existing literature on the extent of this practice, I found that the share of workers subject to mandatory arbitration had clearly increased in the decade following the initial 1991 Court decision: by the early 2000s, the share of workers subject to mandatory arbitration had risen from just over 2 percent (in 1992) to almost a quarter of the workforce. However, more recent data were not available. In order to obtain current data for this study, I conducted a nationally representative survey of nonunion private-sector employers regarding their use of mandatory employment arbitration.

This study finds that since the early 2000s, the share of workers subject to mandatory arbitration has more than doubled and now exceeds 55 percent. This trend has weakened the position of workers whose rights are violated, barring access to the courts for all types of legal claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act.

The Supreme Court is currently considering a case challenging the inclusion of class action waivers in arbitration agreements. Class action waivers bar employees from participating in class action lawsuits to address widespread violations of workers’ rights in a workplace. The Court will rule on whether class action waivers are a violation of the National Labor Relations Act; their decision could have wide-reaching implications for workers’ rights going forward.

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