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Jan. 18, 2002

Supreme Court Arbitration Decision Won’t Do Much to Help Employees

WASHINGTON, D.C. – Although the Supreme Court’s decision in EEOC v. Waffle House will help workers to a limited degree, it leaves non-union employees, consumers and small businesses vulnerable to unfair mandatory arbitration clauses, Public Citizen said today.

"While the court reached the correct result, we are still faced with years of bad precedents in court cases that allow imposition of arbitration and the evisceration of legal rights, which individuals unwittingly sign away when they accept form contracts to open bank accounts, get credit cards, buy homes or accept employment," said Joan Claybrook, Public Citizen president.

The narrow issue decided by the court was whether an arbitration clause signed by an employee also binds government enforcement agencies suing on the employee’s behalf. The court, in a 6-3 decision, ruled to preserve the government’s right to sue in court for civil rights violations even when an employee signs an arbitration agreement.

Arbitration is a private legal system in which, practically speaking, no appeals are allowed. Arbitration is harmful to consumers and workers for a number of reasons. First and foremost, the costs of arbitration are so high that few people — especially those who have just lost their jobs — can afford to assert their claims. Second, as an expedited procedure, arbitration permits very little discovery, denying claimants access to documents and testimony they need to prove their case. Third, arbitration awards tend to be much lower than jury verdicts, because arbitrators often favor companies that will provide them future business.

"The bottom line on this decision is that there is still a huge problem facing employees and consumers," said Jackson Williams, legislative counsel at Public Citizen. "You’re still stuck with arbitration’s high costs, inadequate procedures and skimpy compensation awards."

Legislation is pending in Congress that would provide some relief to employees and consumers. Also, the Senate last year advanced two measures that would restrict imposition of arbitration on small businesses. The Senate Judiciary Committee approved a bill that would ban auto manufacturers from imposing arbitration on auto dealers. The Senate also passed an amendment to farm legislation that would prohibit large agribusinesses from requiring farmers to arbitrate disputes.

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