How Employers Get Away with Violating Workers’ Rights
Forced arbitration has grown into a near-universal feature of the American workplace and marketplace, limiting or revoking the rights of most workers and consumers.
Forced arbitration provisions in employment contracts keep workers from filing legal claims in open court, instead requiring them to pursue claims against employers in private, secret arbitrations. These provisions are routinely paired with class and collective action waivers, meaning workers cannot band together and bring legal claims as a group, leaving them without real access to the legal system.
Workers Get Less Justice in Arbitration
Arbitration is less favorable to workers than litigation. Employees win less often in arbitrations, and win substantially smaller dollar amounts when they do win (EPI 2015).
Arbitration is also much less transparent. Unlike in arbitration, in litigation, employee plaintiffs’ allegations about employer wrongdoing are set out in a complaint that appears on a public docket. Hearings in litigation also occur in open court, and are accessible to the public.
Congress recognized the urgent need for change to this system with the 2022 passage of the bipartisan Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”), prohibiting forced arbitration of cases of sexual assault or sexual harassment.
As further efforts are made at the federal level to build on the EFAA, states can regulate arbitration to mitigate its harmful impacts on workers and consumers.
What States Can Do
Allow Private Citizens to Step Into Government’s Shoes and Enforce State Labor Codes
The single most significant check that states can place on forced arbitration is adopting qui tam legislation like California’s PAGA or New York state’s proposed EmPIRE Act, discussed in the Access to Justice page of this clearinghouse.
Adopt Disclosure Requirements for Arbitration Providers
Both California and Washington DC have reporting requirements for arbitration providers, covering matters like the number of arbitrations a provider performs for a given employer, whether the consumer or employee was the prevailing party, and the amount, if any, of any monetary award in such matters. One of California’s requirements is that neutral arbitrators disclose all potential conflicts of interest. Failure to do so can allow a court to vacate an arbitrator’s decision.
California Code of Civil Procedure § 1281.2
Code of the District of Columbia § 16-4430
More states should impose reporting requirements to shed greater light on the practice of arbitration.
Deny State Business to Companies that Use Forced Arbitration
The Federal Arbitration Act governs much state regulation of arbitration. But there are exceptions: one of the most significant is states’ authority to regulate arbitration when acting as an employer, or purchaser of goods and services. States can pass laws denying state business to companies that impose forced arbitration on their workers or consumers.
Employers Who Fail to Pay Fees Waive Their Right to Arbitrate
California law requires that employers pay arbitration fees within 30 days of their due date. If they willfully, negligently, or fraudulently fail to do so, they waive their right to compel arbitration. A proposed bill in Rhode Island would impose the same timeliness requirement.
California Code of Civil Procedure § 1281.98
Rhode Island SB 353
Revoke the Business Licenses of Companies Imposing Forced Arbitration
New York’s bill S 8126 would prohibit state and local government entities from issuing business licenses to businesses that require their consumers or employees to submit disputes to mandatory arbitration.
New York Senate Bill 8126
Disputes Unrelated to the Terms of a Contract
New Jersey’s bill S 4072 would make arbitration agreements invalid if one of the parties attempts to apply them to a dispute unrelated to the terms of a contract between the parties.
New Jersey Senate Bill 4072
Arbitration Clauses Must Be in Plain Language
New York’s bill S 7799 requires that if mandatory arbitration clauses are included in employment contracts, they must be clearly disclosed and explained in plain language.
New York Senate Bill 7799
Help Build the Clearinghouse
If you have proposals for pro-worker policies—whether already implemented in a particular state or ones you’d like to see established—we encourage you to share your suggestions. We welcome additions to our clearinghouse that align with one of our five key policy areas. Please send such submissions to .
