Forced binding arbitration is an issue that consumers, workers, and citizens should be aware of in their daily lives as they are hired for jobs and buy goods or services here in Hawai`i. You could lose your right to go to court if you do not understand what forced binding arbitration is and how it can affect you. We look at what forced binding arbitration is and how you can avoid common problems associated with this practice.
Understanding What This Type of Arbitration Is
Forced binding arbitration is a legal proceeding to settle disagreements between two parties. Instead of a court case, an arbitrator hears the plaintiff and defendant’s dispute. This arbitrator decides if and how much compensation will be awarded to a plaintiff.
The plaintiff has no choice in agreeing to take part in this forced binding arbitration. As part of a contract the plaintiff signed, they are forced to use this approach for resolving their differences with the defendant.
As far as being forced to take part in this process is concerned, take into account the following examples. A new hire at a company signs a forced binding arbitration agreement or loses their employment. Another example is if someone wants to pursue a Hawai`i personal injury claim but has signed an agreement taking away their right to pursue this because that contract includes a forced binding arbitration clause.
Forced Binding Arbitration Disadvantages
The disadvantages of forced binding arbitration mainly fall on consumers and workers. Companies take a power of choice from workers and consumers by requiring them to agree to an arbitration clause like this.
Some ways companies put consumers and workers at a disadvantage with forced binding arbitration are:
The Plaintiff Lacks Choices
As the name implies, forced binding arbitration forces consumers and workers to give up their rights to choose how they wish to resolve disputes with their employers or companies they do business with, including doctors if they engage in medical malpractice or are liable for some other personal injury.
Legal Jargon and Fine Print Can Be Confusing
Employees, consumers, and others are often confused by the legal jargon and fine print contained in contracts. Similarly, small print can be difficult for some consumers and workers to read. This often leads to them unexpectedly losing the right to file a lawsuit against a company they do business with.
The Discovery Phase Can Be Nonexistent
The word discovery refers to the pretrial process your lawyer takes to get information from the other lawyers about your case. However, in forced binding arbitration, it’s not uncommon for disputing parties, especially the defense, to be reluctant or outright refuse to share information.
A Third-Party Is the Decisionmaker
In a forced binding arbitration, a third party decides if and how much compensation you receive. Sometimes, the third party relies on the company or individual you are bringing the legal action against, making their judgment one-sided toward the defendant and not in your favor.
Your Privacy May Be Compromised
Your privacy may be at risk with a forced binding arbitration. Having to give your personal information to a third party exposes it and can potentially lead to a data breach.
Transparency Is Limited
Often, a forced binding arbitrations is private and there is no public record of the court procedures and the verdict. In binding arbitration proceedings, the company can hide its actions from the public.
Recovering Less Compensation Is a Possibility
Forced binding arbitration may pay you less compensation than if you had taken the case to court. Your arbitration costs may outweigh the compensation you receive.
Limited Appeal Options Exist
After a forced binding arbitration decision, you have limited appeal rights. You cannot easily question the judgment, even if the arbitrator made errors or decisions not in your favor. Final decisions often stay final, even if the results are wrong.
Legal Fees May Be Significant
Enforcing awards from arbitration generally requires more time in court. This may increase your costs, especially if the company disputes the award.
Hawai`i and Forced Arbitration
In Hawai`i, the Hawai’i Supreme Court has ruled that certain provisions of forced arbitration are not enforceable such as in the case of Narayan v. Ritz-Carlton Development Co. The ruling comes from the idea of unconscionability.
Unconscionability is a legal term when a contract or clause is unreasonably unfair to one party in a dispute, marked by oppression or unacceptable to public policy. Participants in a dispute can raise unconscionability. Unconscionability has two major parts:
Lack of Meaningful Choice
A party signing a contract who did not have a meaningful choice about signing a contract, and was surprised by detrimental parts in the contract can claim unconscionability. In Narayan v. Ritz-Carlton Development Co., this part of the unconscionability doctrine was satisfied because the contract was created by a party with “superior bargaining strength.” The purchasers were forced to conform to the terms if they wanted to buy a condominium.
Unfavorable Terms
The second part of the unconscionability doctrine was met when the owners were unfairly surprised by terms near the end of the 36-page contract. These terms contained items unfavorable to the prospective owners. This fulfilled the second prong of unconscionability where terms should not be unreasonably favorable to the other party. While this applies to a condominium sale, unconscionability could also apply to legal issues such as personal injury.
Unconscionability does not apply to all contracts, so speaking with a lawyer familiar with forced-binding arbitration is advisable.
The FAIR Act
The Forced Arbitration Injustice Repeal (FAIR) Act is legislation introduced by Rep. Hank Johnson (D-GA) and Sen. Richard Blumenthal (D-CT) to ban businesses from mandatory arbitration contract clauses with employees and consumers. The legislation would invalidate current arbitration contracts and already signed agreements for disputes after the law goes into effect.
There has been some progress toward the FAIR Act with President Biden signing the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act to end forced arbitration in cases of sexual assault and sexual harassment.
Fair representation is necessary to ensure you receive the compensation you deserve. Wayne Parsons Law Office is committed to this ideal of justice by representing your rights in court. Contact us today.