Is arbitration under attack? Arbitration, Schmarbitration


A few weeks ago, at a meeting of dispute resolution professionals in San Diego, I joined a panel called "Arbitration Under Attack: Reform or Revolution?" The panel began with my distinguished colleagues discussing the ins and outs of recent legislation outlawing the enforcement of mandatory, predispute arbitration agreements for certain #MeToo claims (Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, P.L. 117-90, 136 Stat. 26 (Mar. 3, 2021)). 


But the recent legislation targets only sexual harassment and sexual assault claims; it does not prevent forced arbitration of racial harassment claims, discrimination claims generally, wrongful termination claims, or wage and hour claims, to name a few staples of the modern work law docket. So the panel ended with my asking and answering the following question:


Q. Is arbitration really under attack? 


A. The short answer is no. The title of the panel, I argued, assumed a fact not in evidence: that arbitration of any type anywhere in the U.S. is under attack. If anything, the opposite is true: The form of dispute resolution known as arbitration is riding higher than ever. 


Before I get to the three pieces of evidence that support my point, I should acknowledge an important caveat articulated by my colleague, Professor Jean R. Sternlight of the William S. Boyd School of Law at the University of Nevada, Las Vegas: Arbitration takes many different forms, making it all but impossible to agree on a single definition. To me, arbitration refers to labor or employment arbitration (each of which is quite different in its own right); to other practitioners, arbitration may refer to something else unique to their clients and practices, such as baseball salary arbitration, commercial arbitration, construction arbitration, consumer online arbitration, international trade arbitration, lemon law arbitration, non-binding court-connected arbitration, or securities arbitration, among others. Each form of arbitration has peculiar practices, quirks, or traditions that necessarily inform one's opinion as to whether it is cheap or expensive, fair or unfair, and in the end, good or bad. 


That's why Professor Sternlight's view boils down to "arbitration, schmarbitration": A single definition of the practice may not exist, but one may not be needed so long as the differences as well as the similarities are kept in mind (see Jean R. Sternlight, "Arbitration Schmarbitration: Examining the Benefits and Frustrations of Defining the Process," 18 Nev. L.J. 371, 374 (2018)). 


That said, the types of arbitration that I have in mind are two: labor arbitration, which addresses grievances arising out of collective bargaining agreements; and employment arbitration, which addresses workplace claims arising under federal or state law, such as the anti-discrimination statutes. 


The truth is that neither form of arbitration is under any serious attack. 


Labor arbitration has enjoyed deference from the federal courts since the 1940s and, in some industries, well before that. In 1960, the U.S. Supreme Court made things official when it decided three cases known as The Steelworkers Trilogy. The first two Trilogy cases held that a party resisting arbitration must overcome a strong presumption of arbitrability and will not be permitted to litigate the merits of the dispute in the guise of challenging arbitrability except before an arbitrator ( United Steelworkers v. American Mfg. Co. , 363 U.S. 564 (1960); United Steelworkers v. Warrior & Gulf Navigation Co. , 363 U.S. 574 (1960)). The third Trilogy case made clear that a party seeking to throw out an arbitration award will lose unless it can show that the award fails to draw its essence from the collective bargaining agreement; such party will not be permitted to relitigate the merits of the dispute in court either ( United Steelworkers v. Enterprise Wheel & Car Corp ., 363 U.S. 593 (1960)). 


And employment arbitration, the type under scrutiny at that panel in San Diego, has enjoyed all but unquestioned deference from the courts since the 1990s. In 1991, the Supreme Court took the Federal Arbitration Act of 1925 and elevated it from relative obscurity to preemptive federal policy ( Gilmer v. Interstate/Johnson Lane Corp ., 500 U.S. 20 (1991)). Gilmer held that statutory anti-discrimination claims may be forced by employers into mandatory, predispute arbitration, even though the statutes creating those claims granted the right to judge and jury trials in a judicial forum. 


Which brings me to the three reasons why unilaterally-imposed employment arbitration can hardly be considered to be under serious attack. 


First, forced arbitration is on one of the greatest winning streaks of all time. Since Gilmer , in case after case, the U.S. Supreme Court has upheld arbitration agreements despite the strenuous objections of employees - and sometimes, the conflicting policies codified in other federal and state laws. These cases have included Circuit City Stores Inc. v. Adams , 532 U.S. 105 (2001), which limited the FAA's carve-out for employment contracts to transportation workers only; EEOC v. Waffle House Inc ., 534 U.S. 279 (2002), which held that a private arbitration agreement prevents a public enforcement agency from collecting back pay and other victim-specific relief on behalf of an employee who is subject to such agreement; Epic Systems Corp. v. Lewis 138 S. Ct. 1612 (2018), which held that an arbitration agreement barring class or collective actions does not violate employees' rights to engage in protected concerted activities under the National Labor Relations Act; and Viking River Cruises v. Moriana , 142 S. Ct. 1906 (2022), which preempted the part of California's Private Attorneys General Act of 2004 (PAGA) permitting an employee to avoid arbitration of her individual claim as opposed to her representative PAGA claim. 


In fact, unilaterally imposed non -employment arbitration is on the same winning streak. A prominent example: AT&T Mobility LLC v. Concepcion , 563 U.S. 333 (2011), which held that a California rule declaring arbitration agreements barring consumer class actions to be unconscionable was preempted by the FAA. 


Even the exceptions seem to prove the rule. The few U.S. Supreme Court victories for employees resisting forced arbitration have been modest and based on narrow procedural grounds. A recent case on point: Smith v. Spizzirri , 144 S. Ct. 680 (2024), which held that a lawsuit subject to forced arbitration under the FAA must be stayed rather than dismissed. To an employee seeking to litigate in court, there is practically no difference between having her claim stayed or dismissed. 


Second, the use of forced arbitration has grown by leaps and bounds. In 1992, shortly after Gilmer was decided, just 2% of U.S. workers were subject to take-it-or-leave-it arbitration; a decade later, the figure had jumped to 25%; and by 2018, it had risen to 55% (see Alexander J.S. Colvin, "The Growing Use of Mandatory Arbitration," Economic Policy Institute, April 6, 2028, available at https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/). Today, nearly 60 million workers are subject to mandatory predispute arbitration. Of these, about half have waived the right to pursue class actions, either in arbitration or in court (see Emma E. Knatterud-Johnson, Jason J. Knutson and David Zoeller, "The Practical Effects of Epic Systems v. Lewis," ABA Labor & Employment Law News, Jan. 31, 2024, available at https://www.americanbar.org/groups/labor_law/publications/labor_employment_law_news/fall-issue-2023/the-practical-effects-of-epic-systems-v-lewis/).

Third, outside the #MeToo movement, forced arbitration faces practically no organized opposition. Lobbying for legislation and campaigning for ballot initiatives to cut it back are unheard of. No wonder: 99% of American consumers are unaware of how often and to what extent they have lost the right to go to court to vindicate their rights in all manner of disputes (see National Consumer Law Center, "Study: 99% of Consumers Unaware They Are Subject to Forced Arbitration," Jul. 27, 2023, available at https://www.nclc.org/study-99-of-consumers-unaware-they-are-subject-to-forced-arbitration/).

Is arbitration under attack? Arbitration, Schmarbitration.