Dean Colvin Shares Research with Policymakers

Forced arbitration imposed on workers by corporations undermines employment rights and should be eliminated, ILR Dean Alex Colvin, Ph.D. ’99, told the U.S. House of Representatives Subcommittee on Health, Employment, Labor, and Pensions during a virtual hearing Thursday.

“Forced arbitration has grown to become the predominant way in which employment law disputes are resolved in the American workplace. This change has occurred with little public oversight, but has profound implications for the rights of the American worker,” he said.

Colvin, the Kenneth F. Kahn '69 Dean and the Martin F. Scheinman '75, 'MS '76, Professor of Conflict Resolution, spoke in a U.S. House of Representatives hearing on the proposed Restoring Justice for Workers Act, which would eliminate a forced arbitration system critics say is heavily weighted against workers. It would also restore the ability of workers to bring collective action, rather than having to stand alone, against an employer.

Sixty million current workers gave up their right to go to court when they accepted their jobs, according to Colvin’s research. Most did not realize what they were sacrificing. Mandatory arbitration clauses are typically buried in paperwork new employees sign before starting jobs. Most don’t realize they are also agreeing to resolve disputes through an employer-designed arbitration process that puts them at a striking disadvantage, Colvin said. Almost 25 million workers also waived their right to act in concert with other workers when facing an employer in a dispute, he said during the hearing, entitled “Closing the Courthouse Doors: The Injustice of Forced Arbitration Agreements.”

The proposed legislation, Colvin said, “ … would eliminate forced arbitration and restore the ability of workers to bring class or collective claims, while preserving the beneficial use of arbitration in the collective bargaining context and where there is a genuinely voluntary post-dispute agreement.”

In order to achieve the promise of alternative dispute resolution procedures like arbitration and mediation, Colvin said, “ … it is necessary that they be truly voluntary, bilateral processes agreed to and run equally by both parties to disputes. The current system of forced arbitration imposed on workers by corporations undermines employment rights and should be eliminated.” By contrast, Colvin spoke positively of the longstanding system of labor arbitration with its cadre of neutral arbitrators respected by both sides as the ideal model of successful use of arbitration to resolve workplace disputes.

Colvin, whose mandatory arbitration research has been cited twice in U.S. Supreme Court proceedings, was the lead witness. Three others provided testimony for or against the proposed legislation. Subcommittee Chairman U.S. Rep. Mark DeSaulnier (D-California) endorsed the act and U.S. Rep. Rick Allen (R-Georgia) decried it, saying the proposed legislation would burden already overburdened courts, benefit only trial lawyers and be a “nail in the coffin for job creators.”

U.S. Supreme Court decisions have strengthened corporate employers’ use of mandatory arbitration, and its use has shot up dramatically in the past decade, Colvin said. Sixty-five percent of businesses with over 1,000 employees used forced arbitration and low-wage workplaces are more likely to use forced arbitration, Colvin said, forcing cases on racial discrimination, sexual harassment, veterans’ rights, overtime and other issues behind closed doors. Many of these procedures are confidential, blocking a look into what trends might be developing across an organization.

Drawing on his own research and that of other scholars, Colvin described the state of mandatory arbitration:

• Over 40% of employers in most states and over two-thirds of employers in California, Texas, and North Carolina use it and 65% of employers with over 1000 employees use it. Almost 65% of businesses paying less than $13 an hour mandate arbitration.
• Class action waivers that prohibit employees from banding with other employees were signed by about 25 million workers in 2017 and the waiver practice is growing.
• Forced arbitration results in starkly less favorable outcomes for employees than typically seen in litigation. Studies showed that average damages recovered by employees in those cases averaged $394,223 in federal court and $575,453 in state court, but only $135,316 in arbitration. Taking into account the chance of winning and likely damages, the mean recovery per case for employees in mandatory arbitration was only $25,929, compared to $143,497 in federal court and $328,008 in state court.
• A 2021 study by ILR PhD alumnus and current Penn State Professor Mark Gough that controls for differences in plaintiff, attorney, and claim characteristics finds that the employee win rate in federal court jury trials is 70.7% higher than in forced arbitration and in state court jury trials the employee win rate is 146.0% higher than in forced arbitration. Monetary damages awarded to employees in federal court jury trials are 203.1% greater than in forced arbitration and in state court jury trials are 165.9% greater than in forced arbitration.
• The forced arbitration system is structurally imbalanced. Most employment arbitrators are men who have backgrounds as management-side attorneys who are more likely to rule in favor of employers. Many employers use the same arbitrators over and over, which can lead to employer favoritism by arbitrators.
• Forced arbitration limits access to justice. Most employees cannot afford to hire a lawyer. The odds of winning when an employee represents himself drops to 46% and the average award is 47% lower. For most regular Americans, a contingency fee arrangement where the attorney gets a percentage of the damages if the case is successful, is the only practical way to obtain legal representation in employment cases in forced arbitration the average case only produces $25,929 in damages, compared to $143,497 in federal courts and $328,008 in state courts. For many plaintiff attorneys, that is not enough to justify taking a case. Few cases are contested; employment laws go unenforced.
• Alternative dispute resolution should not be discarded. Research finds that mediation is effective at resolving disputes while not barring workers from going to court. Labor arbitration procedures in unionized workplaces has been successfully used and supported by both labor and management. Voluntary, post-dispute arbitration can also be an effective approach, as found in research by ILR Emeritus Professor David Lipsky.
• The Restoring Justice for Workers Act would establish that pre-dispute arbitration agreements are invalid and restore workers’ rights to make claims as a group, while preserving the use of arbitration in the collective bargaining context and when agreed to on a voluntary, post-dispute basis.