WASHINGTON, D.C. – Attorney General Karl A. Racine today led a group of 12 state Attorneys General calling on the nation’s leading arbitration firms to provide information about obstacles workers face in resolving employment-related disputes. In the letters sent to the American Arbitration Association (AAA) and Judicial Arbitration and Mediation Services (JAMS), the Attorneys General highlight problems workers encounter during arbitration, including high costs and delayed arbitration proceedings. The multistate coalition is requesting documents and data to better understand the cause and scope of the issues. They will then look to work with these entities to ensure the arbitration process is as fair as possible to workers.
“Employees are entitled to a fair process to vindicate their workplace rights, including when they are required to do so through arbitration,” said AG Racine. “We are concerned about reports that workers in the District have encountered high costs and prolonged delays in arbitration that have prevented them from reaching resolutions. That’s why our coalition of Attorneys General has requested data from the leading arbitration firms to better understand how we can protect workers and ensure they have a fair shot at resolving disputes.”
Mandatory arbitration clauses in employment contracts require work-related claims like wage-and-hour issues or disputes over workplace conditions to be resolved by privately-appointed individuals called arbitrators, rather than through the traditional court system. Arbitrators hear from both parties, review the evidence, and make a ruling, though they are not subject to the rules that govern court proceedings. Many employment contracts include these mandatory arbitration clauses, especially for low-wage workers. In fact, one recent survey conducted in 2017 found that 53 percent of non-union private-sector employers had adopted mandatory arbitration procedures. The coalition is concerned about the extent to which obstacles in the arbitration process, like prohibitive filing fees and stalled arbitration proceedings, may prevent workers from quickly and fairly resolving workplace disputes.
The Attorneys General ask for information and documents about existing arbitration policies and data on suspended or terminated claims. Specifically, the coalition seeks to better understand complaints they have received from workers, which include:
- Stalled arbitration proceedings if the employer does not pay the arbitration filing fee: In order for arbitration to begin, AAA and JAMS require both the employee and the employer to pay a filing fee. If the employee pays the filing fee and the employer does not, arbitration does not begin, and there is no clear recourse for the employee to compel the process to proceed other than costly legal action. The coalition is concerned that this leaves the employee—who is forced to use arbitration—unable to resolve their claims.
- Higher arbitration costs for employees if they are classified as independent contractors: When an employer classifies a worker as an “independent contractor” rather than an “employee,” workers can face significantly higher filing fees where arbitrators view the claim as a business-to-business commercial dispute—rather than an employment dispute between employer and employee. This distinction is important, as AAA and JAMS set significantly higher filing fees for commercial disputes relative to employment disputes. However, workers classified as independent contractors routinely bring employment-related claims, including those involving wage-and-hour, workplace conditions, or challenges to their employment classification. The coalition is thus concerned that treating these claims as commercial disputes imposes costs that discourage workers classified as independent contractors from proceeding in arbitration.
AG Racine and Attorneys General from California, Colorado, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, Vermont, and Washington signed the letters.
The letter to AAA can be found at: https://oag.dc.gov/sites/default/files/2019-11/AAA-Arbitration-Data-Letter.pdf
The letter to JAMS can be found at: https://oag.dc.gov/sites/default/files/2019-11/JAMS-Arbitration-Data-Letter.pdf
OAG’s Increased Efforts to Protect Workers
Protecting employees in arbitration proceedings is just the latest action by the Office of the Attorney General (OAG) in a broader effort to stand up for District workers. OAG has launched more than 30 investigations into wage theft and payroll fraud, and has taken action against a home health care provider, a national electrical contracting firm, KFC franchises, a cell phone store, a cafe chain, and other businesses that harmed District workers. AG Racine also recently testified before Congress and highlighted findings from an OAG report about how worker misclassification—a type of payroll fraud—hurts workers, undercuts law-abiding businesses, and cheats taxpayers.