Duff: Mandatory Arbitration Expanding

Wednesday, April 25, 2018 | 0

As I have been arguing for some time, there is no doctrinal reason employers could not subject workers' compensation claims to mandatory arbitration.

Michael C. Duff

Alexander Colvin has just updated his 2017 report on the expanded general use of mandatory arbitration agreements by employers. He argues in an executive summary to the report, "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."

The key findings of the report are:

• More than half — 53.9% — of nonunion private-sector employers have mandatory arbitration procedures. Among companies with 1,000 or more employees, 65.1% have mandatory arbitration procedures.
• Among private-sector nonunion employees, 56.2% are subject to mandatory employment arbitration procedures. Extrapolating to the overall workforce, this means that 60.1 million American workers no longer have access to the courts to protect their legal employment rights and instead must go to arbitration.
• Of the employers who require mandatory arbitration, 30.1% also include class action waivers in their procedures, meaning that in addition to losing their right to file a lawsuit on their own behalf, employees also lose the right to address widespread rights violations through collective legal action.
• Large employers are more likely than small employers to include class action waivers, so the share of employees affected is significantly higher than the share of employers engaging in this practice. Of employees subject to mandatory arbitration, 41.1% have also waived their right to be part of a class action claim. Overall, this means that 23.1% of private-sector nonunion employees, or 24.7 million American workers, no longer have the right to bring a class action claim if their employment rights have been violated.
• Mandatory arbitration is more common in low-wage workplaces. It is also more common in industries that are disproportionately composed of women workers and in industries that are disproportionately composed of African-American workers.
• Among the states, mandatory arbitration is especially widespread in California, Texas and North Carolina, but in all of the 12 largest states by population, over 40% of employers have mandatory arbitration policies.

I was especially struck by the finding that the growth of mandatory arbitration has been accelerating in the last five years.

For employers who have adopted mandatory arbitration, the survey asked them how recently they had adopted this policy. Among the employers with mandatory employment arbitration, I find that 39.5% of them had adopted their policies within the last five years, i.e., from 2012 to 2017, whereas 60.5% had adopted their policies more than five years ago.

This cutoff date is important because it was in 2011 that the Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion, ruling that class action waivers in the mandatory arbitration agreements were broadly enforceable. This means there was a substantial growth in the adoption of mandatory employment arbitration during this five-year period following the Supreme Court giving a green light to the use of mandatory arbitration clauses to bar class actions.

It is also interesting to note the density of mandatory arbitration by state:

• California, 67.4%.
• Texas, 67.9%.
• Florida, 53.6%.
• New York, 55%.
• Illinois, 42.3%.
• Pennsylvania, 54.5%.
• Ohio, 51.8%.
• Georgia, 55.3%.
• North Carolina, 70%.
• Michigan, 42.9%.
• New Jersey, 40.5%.
• Virginia, 55.2%.

I find it unsurprising. What readers should consider is why this trend would stop at the hallowed gates of workers' compensation. All I can say is that I find no legal reason it would do so.

The Federal Arbitration Act pre-empts all sorts of state law very broadly. And though it is useful to follow the tea leaves for reversals of policy, I am perpetually alarmed that the workers who are not transformed into independent contractors as "gig" workers, will be swept into arbitration by the FAA.

Michael C. Duff is associate dean for student programs and external relations, and Centennial Distinguished Professor of Law at the University of Wyoming College of Law. This entry is republished from the Workers' Compensation Law Professors blog, with permission.