Press Releases | Forced arbitration

News from EPI Women and African Americans are more likely to be subject to mandatory arbitration

New EPI research by Cornell professor Alexander J.S. Colvin shows that women and African Americans are more commonly subject to mandatory arbitration than other workers, and that the practice is especially widespread in California, Texas, and North Carolina. This report builds on his 2017 paper that found that that more than half of private-sector nonunion workers—or 60 million people—are subject to mandatory arbitration in employment contracts, which takes away their access to the court system that protects their legal employment rights.

Mandatory arbitration agreements are used by employers to require workers, as a condition of employment, to agree to arbitrate workplace disputes rather than being able to resolve these matters in court. These agreements bar access to the courts for all types of employment-related claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act. In other words, when a worker is paid less than she is owed, is fired for being pregnant, or is underpaid because of her race, she cannot have her claim heard in a court of law—instead, she is locked into a process that favors the employer.

Analyzing this group of private-sector, nonunion workers, Colvin estimates that 57.6 percent of female workers (29.3 million) and 53.5 percent of male workers (30.8 million) are subject to mandatory arbitration. He estimates that 59.1 percent of African American workers (7.5 million), 54.3 percent of Hispanic workers (10.0 million), and 55.6 percent of white, non-Hispanic workers (38.9 million) are subject to mandatory arbitration. The paper also examines mandatory arbitration levels by industry and education level.

Mandatory arbitration also has a tendency to suppress claims. Colvin estimates that an average of only 5,758 mandatory employment arbitration cases are filed per year nationally. Given that 60 million American workers are now covered by these procedures, this means that only 1 in 10,400 employees covered by these procedures actually files a claim under them each year. Moreover, these claims are less likely to succeed than lawsuits, and when workers do prevail in arbitration, they are awarded far less in damages.

“Working people depend on the court system to hold employers accountable to the law,” said Colvin. “Mandatory arbitration locks them out of the court system and disincentivizes them from pursing justice.”

Additionally, Colvin finds that 41 percent of employees subject to mandatory arbitration also have waived their right to be part of a class or collective action, with large employers more likely than small employers to include these waivers. Overall, this means that 23.1 percent of private-sector nonunion employees, or 24.7 million American workers, no longer have the right to bring a class action claim if their employment rights have been violated.

This is particularly relevant because this spring, the Supreme Court will decide National Labor Relations Board v. Murphy Oil USA, Inc. (Ernst & Young LLP v. Morris and Epic Systems v. Lewis), a case challenging mandatory arbitration agreements with class and collective action waivers as a violation of the National Labor Relations Act.

“The Trump administration and corporate interests are fighting to take away workers’ right to join together to improve their wages and working conditions. The National Labor Relations Act guarantees workers this basic right,” said EPI Director of Labor Law and Policy Celine McNicholas. “The #metoo and #timesup movements demonstrate the power of collective action—that is exactly what is at stake in this case. It is essential to a fair economy that workers have the right to engage in collective action.”

The increasing use of mandatory arbitration by employers is part of a trend that has left workers with increasingly less power in the workplace. Access to statutory remedies is an important part of EPI’s agenda to raise wages for American workers.

EPI will hold a panel discussion on the growing use of mandatory arbitration at 12:00 p.m. Eastern today. A live stream will be available. 

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