Asian Journal- The Filipino-American Community Newspaper

Q: AS a consumer who signs agreements in connection with a credit card or cell phone application, I see the term "arbitration" all the time. I even see it in some employment contracts. I heard that arbitration is good for the consumer or employee since it will save money and time. Is this true? Is arbitration really better for consumers and employees?

A: Generally, arbitration is not advantageous to consumers or employees. In fact, the evidence gathered so far by several consumer advocate groups, indicate that arbitration favors the business or company rather than the consumer.

Arbitration is a procedure to resolve disputes without bringing a lawsuit, where the disputing parties refer the dispute to a third party (the arbitrator) who reviews the case and makes a decision that is legally binding on both sides. By agreeing to arbitration, the consumer waives his right to have a judge or jury decide the case.

Arbitration is most commonly used in commercial disputes (where the disputing parties are all business entities). The use of arbitration is far more controversial in consumer and employment disputes (where one party is a business and the other is an individual). Arbitration in a consumer or employment situation is not usually the product of negotiation but is practically imposed on consumers or employees through contract provisions.

Big businesses claim that arbitration is a cheaper alternative to filing a lawsuit. However national studies indicate that in consumer disputes, the high fees associated with mandatory arbitration make it difficult for consumers to vindicate their rights. Most arbitration providers require hundreds of dollars in filing fees. Thousands more are to be advanced for the arbitrator’s daily or hourly fees. In employment disputes, however, California law requires that arbitrator’s fees be paid for by the employer.

The biggest downside to consumers though is the waiver of their right to jury trial. Unlike jurors who make independent decisions in trial, arbitrators naturally want repeated business from employer or corporate entities. Hence, some arbitrators may find it hard to rule or award significant damages for consumers and employees.

The bias towards companies is practically built into the system. Elizabeth Bartholet, a law professor at Harvard and arbitrator with the National Arbitration Forum (NAF), was removed from arbitrating on her remaining cases when she ruled against a credit card company and sided with a consumer. Bartholet said that arbitrators know fully well that if they rule against corporations too often, their income will dry up.