Imagine calling a customer service line to figure out why there’s a random erroneous $50 overcharge on your bill. After spending hours talking to different people, it’s clear this dispute won’t be resolved over the phone, and hiring a lawyer to handle a low-dollar claim isn’t worth it. What’s the best way to resolve this dispute quickly? The answer for hundreds of thousands of people who have relatively small-dollar claims like this in a variety of contexts is a nearly century-old system called arbitration.
Arbitration is a faster way for both consumers and employees to resolve disputes with companies than filing lawsuits. Litigation is time-consuming and expensive, often taking years to work through the courts, while legal fees can typically chew up a third or more of any settlement or award. The only consistent winners are trial lawyers.
It might come as a surprise to learn that Congress is considering taking away this option. A bill called the Forced Arbitration Injustice Repeal, or FAIR, Act making its way through Congress effectively bans most forms of arbitration for consumers and employees. Don’t let the acronym fool you; the FAIR Act is a gift to the trial bar without regard to what people prefer.
Arbitration is popular among voters. A survey released by my organization, the U.S. Chamber Institute for Legal Reform, found that more than 6 in 10 people view arbitration as a favorable way to resolve disputes between consumers and businesses and employees and employers. The survey also found that people prefer arbitration to both filing an individual lawsuit or being part of a class-action lawsuit. In other words: People want to keep their access to arbitration.
The data show arbitration is pro-worker and pro-consumer, too. Two separate economic studies by NDP Analytics and released by ILR compared the results of more than 100,000 employee and consumer arbitrations with litigation. Both studies show workers and consumers won more money more often and more quickly in arbitration than in court. Arbitration isn’t just for high-earning professionals, either. More than 79% of employees who initiated arbitration during the study period earned less than $100,000 a year. On average, employees won twice the amount of money in arbitration than in court, while consumers won $10,000 more on average.
Arbitration is so effective that the authors of the FAIR Act carved out an exception for labor unions, which typically demand arbitration in their contracts with employers. Under the FAIR Act, unions can still use arbitration to settle their differences with businesses. At the same time, individual consumers and employees would be left to the mercy of the trial lawyers.
So, who is really behind the unfair FAIR Act? Trial lawyers, of course, especially attorneys who file class-action lawsuits and receive millions of dollars in fees in those cases. The trial bar has proclaimed ending arbitration to be its No. 1 priority, even as the U.S. Supreme Court has repeatedly upheld the rights of businesses and consumers to agree to resolve disputes outside of court.
Arbitration is a fair and efficient way to keep disputes out of our already overcrowded courts. The loudest voices to get rid of arbitration are the ones who make money off costly, bloated, and inefficient litigation. When it comes to arbitration, Congress should ignore the lawyers and listen to their constituents instead.
Harold Kim is the president of the U.S. Chamber Institute for Legal Reform.
