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You have something in common with Stormy Daniels

Surprised? You both have arbitration agreements. We all agree to arbitration as the means of resolving disagreements dozens of times. Arbitration agreements are standard to most agreements, including all those times you click “yes” before signing for a new app.

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Photo credit: © Glenn Francis, http://www.PacificProDigital.com

Why should I care?

Most arbitration agreements you sign will have no effect on your life. Arbitration clauses in employment agreements, on the other hand, may cause you problems. Moreover, most financial agreements, including your bank accounts and credit card accounts, have arbitration clauses. Perhaps more ominous is the use of arbitration clauses in nursing homes. The recent growth of the use of arbitration clauses also degrades the quality of American justice.

What’s the problem with arbitration clauses?

Some lawyers refer to arbitration courts as “secret corporate courts” for several reasons.
  • Most arbitration clauses limit you to individual hearings. It puts the brakes on class actions. While they usually result in small individual settlements, they have a much stronger impact on the way businesses operate in the future. Studies show that few people pursue small violations through arbitration. When many small legal violations are combined in a class action lawsuit, the size of the settlement sends a strong message to the business. As a result, businesses are much more likely to abandon unfair and illegal practices.
  • Indeed, in 2014 attorneys general of 14 states sent a letter to the Consumer Financial Protection Bureau warning that “unlawful business practices” could flourish with the growth of arbitration clauses.
  • Arbitration essentially shields the wrongdoer from the public exposure that a trial in open court brings, hence the “secret corporate courts” designation. Many times the most potent tool the injured person has is the threat of exposure of the wrongdoer.
  • Arbitration rules favor businesses who can often steer cases to friendly arbitrators.

What can I do about the arbitration clauses in my life?

There are some situations in which you may be able to negotiate and different means of resolving contract issues. In addition, there are a few situations in which you can have your case heard in court. There are not many. If the money amount or the issue is significant, do explore the options with an experienced employment or personal injury attorney. At GSJones Law Group check out Chalmers Johnson and John Groseclose.

A few states are beginning to enact laws that limit the use of these clauses. If you are concerned about the creation of a separate legal system in the U.S. find out if your state has laws to address the issue and talk with your representatives about the issue.

Want to know more? Check out this excellent deep dive into what’s happening with arbitration clauses in the New York Times.