When justice is arbitrary: Mandatory mediation on the rise

After 10,000 flight attendants walked out on Canada’s largest airline, the national government tried to resolve the strike through an unusual but technically fair process: forced arbitration. But one side of the dispute said the move was unethical.

“The whole process has been unfair,” Mark Hancock, president of the Canadian Union of Public Employees, said outside the main airport serving Toronto. “Our members are not going back to work. … We are saying no.”

The Canadian government’s unusual power play also faced controversy among the public. 

“Binding arbitration is not a default option,” Jason Foster, a professor of human resources and labor relations at Athabasca University in the province of Alberta, told Straight Arrow News in a telephone interview. “It’s a much less common way to resolve a conflict. The most common is they come to agreement. This is an exception.

“Instead of being the rule maker and then stepping aside and letting parties play,” Foster said, “it’s suddenly the government inserting itself onto the playing field.” 

On Tuesday, Air Canada and the union reached an agreement after a four-day strike — without government-ordered arbitration. 

While this kind of interference and compulsory arbitration is rare in Canada, American companies have been using mandatory arbitration for a century. In 2022, the latest year for which statistics are available, forced arbitration cases in the United States surged by 467%, according to the American Association for Justice, an organization that represents plaintiffs’ attorneys. 

This begs the question: What exactly is mandatory arbitration, and whom does it behoove?

What is arbitration? 

Arbitration is a private dispute resolution process, a legal method that compels parties to dispute disagreements outside of court, behind closed doors. Instead of a judge and a jury, a third party mediates the arbitration process. While arbitration can be a cheaper and quicker process than litigation, it’s also less transparent and doesn’t allow for a trial. 

U.S. law supports arbitration. This year marks the centennial of the Federal Arbitration Act, which aimed “mostly to resolve contract disputes between businesses — and stop trying to apply it to dealings where it doesn’t belong, including the bulk of claims by consumers and employees,” wrote Peter Coy, a journalist who specializes in economics and business. 

When the law was enacted, it was promoted by a future president, Herbert Hoover, who was then Secretary of Commerce.

“Next to war,” Hoover said, “the greatest source of economic waste in our national life is needless litigation.” 

Arbitration benefits  

Arbitration can be quicker and cheaper than filing a lawsuit.

“At its best, arbitration provides judgments that are fast, frugal and fair,” Coy said. “Arbitration is good for cases that would be too expensive to pursue as individual actions and too idiosyncratic to pursue as class actions.” 

Arbitration can also be significantly more flexible than court litigation.

“Arbitrators are allowed to use more relaxed rules of evidence and to prevent foot-dragging by either side,” Coy said. “Arbitrators are less likely to be swayed by a crafty appeal to emotion than a jury might be.” 

Some say that in providing less transparency, arbitration favors businesses. Those who have experienced wrongdoing are forced inside the walls of an arbitration room, with little accountability for wrongdoing. Congress acknowledged that inequity in 2022 when it banned forced arbitration in cases involving sexual assault or sexual harassment, in the wake of the #MeToo movement. 

The small print 

Many people don’t realize how frequently they sign away their right to a trial. Embedded in the fine print in many user agreements and employment contracts are arbitration clauses, where people agree to settle disputes not in court but through arbitration.

“Most employers in the U.S. now require employees to accept a mandatory arbitration clause — waiving their right to sue in court as a condition of work,” wrote Dan Ocampo for the National Employment Law Project, a nonprofit advocacy organization. “Workers must either accept the contract as is or reject the job. Cashiers at Walmart, warehouse workers at Amazon, and drivers for Uber all must accept a contract that prohibits them from bringing a lawsuit for violations of their rights except through final and binding arbitration.” 

Consumers also waive their right to trial, often without knowing it. For instance, a court in New Jersey ruled that a couple injured by an Uber driver could not bring their case to court because they had previously ordered a pizza on Uber Eats. The Uber Eats user agreement compelled arbitration. 

“‘Click to accept’ or ‘click through’ agreements contain forced arbitration clauses trapping consumers into a private, secret system where the corporation writes the rules and picks the arbitrator,” the American Association for Justice said in a 2023 press release. “Consumers never knowingly consent to forced arbitration. By the time they are scammed or defrauded, their hands are tied, and they are trapped simply because they have used a product or signed up for a service, making justice unreachable.”

Because of the surge in arbitration cases, the association said, “In 2021, consumers were more likely to be struck by lightning than win a monetary award in forced arbitration.”