Mandatory arbitration is a private-sector alternative to the public court system in which grievances are decided by a private panel instead of a jury. Originally, arbitration was used to resolve business-to-business disputes. But in the last 20 years, it has become the method of choice for businesses to resolve disputes with customers. Businesses in virtually every industry have embraced arbitration as faster, cheaper and more efficient than litigation. It is imposed on employees and customers as a routine and often unnoticed condition of doing business. Without realizing it, many consumers, employees, stockholders and patients sign mandatory arbitration clauses in credit, telephone, car and health insurance contracts, bank loans, rental leases, agreements for babysitting, nursing homes, summer camps, house repairs and more. Critics claim arbitration lacks the legal safeguards of our court system and warn that company panels can be tainted with conflicts of interest that might skew the case’s outcome.

Critics claim many arbitration panels, compensated by companies, are biased and often decide in favor of companies which they consider their clients. In addition, consumers may still need to hire an attorney to represent their interests when facing mandatory arbitration.

Industry supports claim arbitration eliminates attorney costs thereby keeping costs low for all consumers. Opponents say arbitration, in effect, privatizes our justice system and results in lower settlements than individuals would receive from a jury trial. They also say arbitration protects corporations from large jury verdicts, including class action lawsuits, to the detriment of consumers and employees.

Pending Legislation: H.R.2953 - Forced Arbitration Injustice Repeal Act of 2023 or the FAIR Act or FAIR Act of 2023
Sponsor: Rep. Henry C. “Hank” Johnson (GA)
Status: House Committee on the Judiciary
Chair: Rep. Jim Jordan (OH)