Civil and Human Rights

Forced Arbitration and Corporate “Justice”: Proof that We Need a Supreme Court That Understands How the Law Affects Ordinary Americans

From today’s oral argument in Rent-A-Center v. Jackson, it appears that corporate America, and apparently some Justices on the Supreme Court, believe that there are basically only two situations in which a court can invalidate a broad, mandatory, pre-dispute arbitration agreement signed by an applicant for a job with a corporate employer as a condition of being hired.  First, arbitration might not be required if the would-be-employee signed the agreement only because the employer put a gun to her head or got her drunk and had her sign under the influence.  Second, the courthouse doors might be open if it were discovered that it was not the now-employed person’s signature on the agreement, but rather the handwriting of “Joe Bananas,” some weirdo (courtesy of Justice Breyer’s imagination) who has been running around impersonating the poor employee.

It should be noted that these fanciful hypotheticals discussed at today’s oral argument do not cover the most frequent, real world “gun-to-the-head” scenario faced by job applicants, in which their only “choice,” if they want the job, is to agree to arbitrate, on the employer’s terms, any and all future disputes —a “choice” characterized by Chief Justice Roberts as “economic inequality or whatever.”  Only the literal gun-to-the-head scenario will suffice, apparently; not being free to assert your right to access the courts because it means you won’t be hired and maybe won’t be able to support your family, does not.

While the hypotheticals were plentiful at argument today, the actual facts of the case before the Court were little discussed.  The petitioner, Antonio Jackson, signed an agreement when he was offered a job at Rent-A-Center that required him to give up his right to access the courts in the event of a future claim against his employer, and instead submit any and all future claims to a private arbitrator.  Jackson did not have a real choice about whether to sign this agreement; he was given no opportunity to negotiate its terms, and the failure to sign would have meant he would not get the job.  The terms of the agreement were lop-sided in favor of Rent-A-Center, particularly with respect to fees and discovery procedures.  Moreover, corporate employers like Rent-A-Center are repeat players in the arbitration system and their continued patronage keeps arbitrators in profitable business, which means that arbitrators may well be predisposed in the employers’ favor.

Later, when Jackson believed he had been subjected to racial discrimination as an employee at Rent-A-Center, he sought to bring a claim in federal court under section 1981, a statutory provision originating in the Civil Rights Act of 1866 that prohibits discrimination in contractual relationships, including employment.  He argued that the arbitration agreement he signed was “unconscionable” in that it was unfair and was forced on him by his employer, and that he had not meaningfully agreed to give up his right to go to court.  Rent-A-Center argued that even this threshold question of whether there was a valid, fair agreement to arbitrate must be considered by an arbitrator, not a court.  As discussed previously on Text & History here and here, and in the brief filed by CAC and other civil rights organizations in this case, precluding access to courts is particularly troubling in Section 1981 cases like Mr. Jackson’s, because the Reconstruction Congress that passed the statute was expressly concerned that federal courthouse doors be open to victims of discrimination.

The Supreme Court’s current pro-arbitration stance is not just in conflict with the Civil Rights Act of 1866—it goes far beyond what Congress intended when it enacted the Federal Arbitration Act (FAA), the statute from which the Court purportedly draws its pro-arbitration policy. The federal pro-arbitration policy that is embodied in the FAA simply means that if two parties have entered into a valid, consensual agreement to arbitrate, the courts must then construe the scope of that agreement just like any other contract. There is textual and historical evidence that Congress meant to safeguard the ability to choose arbitration instead of court proceedings for commercial partners making contractual decisions from similar positions of bargaining power and sophistication. There is also textual and historical evidence that Congress did not intend to include within this “pro-arbitration” policy employment contracts like the one involved in this case.

Unfair, forced arbitration is not just a problem in civil rights cases, however.  As Justice Ginsburg noted at oral argument today, mandatory arbitration agreements are “very common in consumer, credit card agreements, in employment contracts,” and “one party has no say except to sign or not to sign.”  This is quite true—as Mr. Jackson’s counsel pointed out to the Justices today, it was likely that many people, even in the gracious courtroom of the Supreme Court, were subject to arbitration agreements they didn’t even know about.  If you have a cell phone, see a doctor, or have signed just about any employment contract with a large, corporate employer, you’re likely subject to mandatory arbitration of claims that haven’t even arisen yet.   The terms of this arbitration agreement could be incredibly unfair to you, while favoring the big corporation on the other side, and even if you might have agreed to arbitration had you focused on it, you likely had no opportunity to negotiate these terms to something more equitable.

But don’t look to Justice Scalia for any sympathy if you want access to justice and find the terms of the mandatory arbitration agreement unfair.  In his view, you haven’t been coerced into anything—you’re just “a stupid person who voluntarily signs an unconscionable contract.”  According to Justice Scalia, the law may in some circumstances “protect you because you are stupid, but you haven’t been coerced.”

This is an astonishing statement given the broad swath of Americans who are swept up into the category of people who have had no choice but to sign mandatory arbitration agreements that are lop-sided in favor of corporate entities and fundamentally unfair.  Maybe you signed that agreement in the medical office, even though it seemed wrong, because you had to get in to see the doctor to have your sick child examined and didn’t want to make a fuss.  Maybe you signed that mandatory arbitration agreement, even though it seemed unjust, when you took that job because you had no choice and you needed the work to put food on the table for your family.  But you certainly didn’t sign up for forced arbitration because you’re “stupid.”

If ever there were an oral argument that drove home the need to have a Supreme Court that understands, as President Obama and others have put it lately, how the law affects “ordinary Americans”—this was it.


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