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The Latest Happenings in D.C. Affecting Your Business

Slate Columnist, Emily Bazelon has an excellent description that  Employers (especially Federal Contractors) should review about President Obama’s August executive order involving limiting mandatory arbitration for large federal contractors’ employees:

DC Politics, pro-labor or anti-labor aside, Bazelon also does a nice job calling attention to the increasing prevalence of mandatory arbitration clauses, which WILL be enforced by the courts (state and federal).  When this happens, many types of cases get sent to an arbitrator, rather than letting the consumer have their shot in court in front of a judge or jury.

These clauses are often in fine print and buried in warranty manuals and click-through boxes (which must be scrolled all the way to the bottom) on websites.  Nearly all consumer contracts, from cell phone contracts and home internet service contracts to car and product warranty manuals attempt mandatory arbitration to resolve disputes.  While not every arbitration is stacked against the end user/consumer of a large company’s product/service, many are. That is why large companies go to the trouble of setting up a system for how to adjudicate these disputes rather than letting a court decide.  There are entire businesses that operate these whole-sale arbitration cases. Often they are located far from where you live and where you bought and used the product.  These types of arbitrators only hear the same types of complaints about one company’s product or services over and over, and fees and costs are not evenly shared.  Arbitration used to be a quicker and less expensive alternative to litigation. But, if you get stuck having to fly to Michigan to put on your case before a Honda of America’s exclusive Arbitrator (seriously), you’ll think twice about really refusing to have the dealer install a re-manufactured engine and insist on a new one under your warranty…

But, because arbitration is a creation of a contract where meeting of the minds between the agreeing parties is required, you can try opt out of arbitration by refusing to agree to those specific terms in an agreement.  Sometimes a company will not let you.  Web based license and use agreements for websites and software are a good example where if you don’t click, you can’t use the product.  But in other cases where you’re presented a paper contract, you should review and look to strike (line straight through) the arbitration clause.  You can always agree at a later time to go to arbitration after a dispute arises.  If you’ve opted out of arbitration it will often give you a stronger position if you have a dispute since you will be allowed to go to court.  It doesn’t always work, like the last time I bought a car, the dealer refused to agree to my striking the arbitration provision (I ended up buying the car anyway), but it’s usually a smart move to try extract yourself from mandatory arbitration, which can that take you far from home, and stacks the deck against you.