Small Print, Big Impact: Examining the Effects of Forced Arbitration (U.S. Senate Committee on the Judiciary)

Hearing	Small Print, Big Impact: Examining the Effects of Forced Arbitration
Committee	U.S. Senate Committee on the Judiciary
Date	April 9, 2024

 

Hearing Takeaways:

• Forced Arbitration Agreements: The hearing focused on the use of forced arbitration agreements in employment contracts, product manuals, and terms of services. Committee Democrats, Ms. Carlson, Prof. Giles, and Ms. Grace criticized the widespread use of forced arbitration agreements and stated that many Americans do not know that they are subject to these agreements. They stated that these agreements deprive Americans of their Seventh Amendment right to a jury trial, are not subject to public laws and precedents, advantage corporations in disputes, prevent poor corporate behavior from being made public, and limit appellate rights. They stated that Americans should have the right to decide whether to pursue their claims via arbitration or formal court proceedings. Committee Republicans and Mr. Schwartz asserted however that arbitration can provide a superior means of dispute resolution in certain contexts. They stated that arbitration is often cheaper, more convenient, and accessible than the formal court system. Mr. Schwartz further stated that courts will deem forced arbitration clauses unconscionable if the clauses are improper.
  • Cost, Convenience, and Access: Committee Republicans and Mr. Schwartz remarked that arbitration can provide a cheaper and more convenient means of resolving disputes. They stated that arbitration can be cheaper than litigation because arbitration has lower fees, offers less complex rules, and does not require claimants to retain attorneys for representation. Committee Members and Mr. Schwartz also stated that arbitration can be more convenient because it allows for claimants to pursue their clams on their own schedules and at their preferred venues. Mr. Schwartz noted how claims pursued in the court system can take time to adjudicate and are often prone to delays (especially given current case backlogs attributable to the COVID-19 pandemic). Mr. Schwartz stated that it can be very difficult for a claimant to obtain a plaintiff’s attorney in an employment case unless the contingency fee is very substantial. He commented that arbitration provides these plaintiffs with better access to the legal system. Prof. Giles remarked however that forced arbitration agreements are not cheaper, faster, or easier and commented that consumers would willingly enter into such agreements if this were the case. She also stated that arbitration fees are “dramatically higher” than court fees and noted that individuals do not need to pay judges to hear their cases (unlike arbitrators).
  • Limitations on Discovery: Full Committee Chairman Dick Durbin (D-IL), Prof. Giles, and Ms. Grace raised concerns that arbitration limits the ability of claimants to pursue discovery, which undermines their ability to prove their claims. Prof. Gilles stated that arbitral providers tend to limit discovery to ensure that their repeat clients will have lower costs and will not face many depositions.
  • Transparency Concerns Regarding Arbitration Decisions: Full Committee Chairman Durbin, Ms. Carlson, Prof. Giles, and Ms. Grace raised concerns that decisions reached in arbitration proceedings are often not made public. They stated that this lack of transparency can prevent the public from becoming aware of wrongdoings, which can cause the wrongdoings to be perpetuated. Mr. Schwartz asserted however that individuals can tell public officials about the results reached in arbitration cases. He stated that courts have stricken down gag orders related to these cases. He asserted that the ability to discuss the results of arbitration proceedings is a free speech issue. He further noted how non-disclosure agreements (NDAs) can be used in litigation settlements.
  • Lack of Knowledge and Consent for Forced Arbitration Agreements: Full Committee Chairman Durbin, Ms. Giles, Prof. Gilles, and Ms. Grace raised concerns that many employees and consumers will enter into forced arbitration agreements without knowledge or affirmative consent. Ms. Grace stated that she had not signed any forced arbitration agreement and been subjected to the agreement because her employer claimed that she had attended a seminar (which she denied attending). Full Committee Chairman Durbin, Ms. Carlson, Prof. Gilles, and Ms. Grace called it impractical for consumers to be aware of the forced arbitration agreements that they are agreeing to or abstain from them given their widespread use. Sen. Thom Tillis (R-NC) and Mr. Schwartz stated however that employees and consumers should be responsible for knowing whether an employer, product, or service contains a forced arbitration agreement in their contract. They argued that employers and customers can forgo a job, product, or service if they find the terms of the contract objectionable.
  • Potential for Bias Among Arbitrators: Committee Democrats, Prof. Giles, and Ms. Grace raised concerns that arbitrators can be biased in favor of corporations because corporations often get to choose the arbitrators that hear disputes. They also stated that arbitrators might be more biased in favor of corporations because arbitrators want repeat business from the corporations. Mr. Schwartz asserted however that businesses do not prevail more when using arbitration relative to litigation. He also mentioned how a Stanford Law Review study had found that damage amounts do not vary across arbitration and court settings. Sen. Mazie Hirono (D-HI) and Sen. Laphonza Butler (D-CA) suggested that arbitration bias could be mitigated through having claimants and defendants jointly select arbitrators to hear a claim. Prof. Giles argued however that this approach would not address these bias concerns as corporations generally have more familiarity with arbitrators than employees and consumers.
  • Impact on Class Action Claims: Sen. Sheldon Whitehouse (D-RI) and Prof. Gilles raised concerns that forced arbitration agreements often preclude consumers from filing class action claims, which enables corporations to engage in high-volume low-dollar fraud more easily against consumers. They stated that most consumers are unlikely or unwilling to pursue arbitration to resolve these low-dollar frauds, which creates an incentive for corporations to engage in them. They noted how class action lawsuits have traditionally been used to address these situations. Mr. Schwartz suggested however that the Committee consider how class action lawsuits work in practice. He commented that the attorneys involved in class action lawsuits often receive a disproportionate amount of the monetary awards relative to the aggrieved parties.
  • Impact on Antitrust: Sen. Amy Klobuchar (D-MN) and Prof. Giles expressed concerns that forced arbitration agreements can limit the ability of consumers to bring antitrust claims against corporations. Sen. Klobuchar called this situation especially problematic given how federal antitrust enforcement agencies are underfunded. She asserted that private lawsuits are key to enforcing the U.S.’s antitrust laws. Sen. Klobuchar and Prof. Giles also stated that larger companies with more market power can obtain contracts without forced arbitration agreement clauses while smaller companies with less market power are unable to obtain such contracts.
  • Impact on Economic and Gender Inequality: Sen. Butler and Prof. Giles expressed concerns that forced arbitration agreements can perpetuate economic and gender inequality. Prof. Giles noted how women and minorities tend to work in fields where forced arbitration agreements are more frequently employed. She also stated that women and minorities are the least likely groups to bring claims in court and commented that this trend predates forced arbitration agreements. 
  • Mass Arbitration: Prof. Giles discussed the trend of mass arbitration in which victims simultaneously file thousands of individual arbitrations. She commented that mass arbitration forces corporations to make good on their contractual promises to pay the cost of arbitrating large numbers of individual claims. She called it unsurprising that companies faced with mass arbitrations will often go to courts to seek relief from their own contracts. She noted that while the U.S. Chamber of Commerce has described mass arbitration as a form of extortion, she indicated that federal judges overseeing mass arbitration cases have described the cases as “poetic justice.”
• The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021: Committee Members and Ms. Carlson highlighted how Congress had successfully enacted the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 into law in March 2022. As the title suggests, this law prohibits the use of forced arbitration agreements in cases of sexual assault and sexual harassment. Sen. Cory Booker (D-NJ) and Ms. Carlson stated that the predictions that this law would overburden the court system have not come true and that this law has changed the culture around workplace sexual harassment. Ms. Carlson also recounted several instances where employees have used this law to bring sexual misconduct claims through the court system. Sen. Marsha Blackburn (R-TN) and Ms. Carlson further stated that the U.S. should work to educate the public on the law because companies are unlikely to publicize the fact that their employees can now pursue avenues outside of the arbitration process to resolve sexual misconduct claims. 
• Legislative and Policy Proposals to Expand Current Prohibitions of Forced Arbitration Agreements: The hearing further considered legislative and policy proposals to prohibit forced arbitration agreements in additional contexts. Sen. Cory Booker (D-NJ) expressed frustration that the U.S. Senate is addressing the use of arbitration for discrimination cases on a piecemeal basis. He asserted that the U.S. Senate should instead take a broader approach to the issue. However, Sen. Marsha Blackburn (R-TN) expressed opposition to efforts to expand the prohibition on arbitration beyond the context of sexual assault and harassment.
  • Age and Race Discrimination: Committee Members, Ms. Carlson, Prof. Giles, and Ms. Giles expressed support for the Protecting Older Americans Act of 2023, which would enable employees to pursue age discrimination cases through the U.S. court system. Mr. Schwartz also stated that people should be able to opt out of arbitration agreements within the context of age discrimination. Ms. Carlson further expressed support for and the Ending Forced Arbitration of Race Discrimination Act of 2023, which would enable employees to pursue race discrimination cases through the U.S. court system.
  • The Forced Arbitration Injustice Repeal (FAIR) Act: Prof. Gilles remarked that Congress should further revisit the United States Arbitration Act and expressed support for the FAIR Act. She explained that the FAIR Act would amend the United States Arbitration Act so that this law would not apply to pre-dispute forced arbitration provisions imposed upon consumers, workers, and small businesses.
  • Federal Regulation of Arbitration Agreements: Mr. Schwartz remarked that federal regulation of arbitration agreements would be preferable relative to having state courts oversee this space. He asserted that federal regulation of arbitration agreements would provide more clarity to all parties. He added that federal regulation would be especially important in areas of controversy, such as disputes involving age, military, children, and nursing homes. He commented that such regulation would preserve the current benefits of arbitration while addressing potential abuses of the tool. Of note, Full Committee Ranking Member Lindsey Graham (R-SC) expressed receptiveness toward Mr. Schwartz’s suggestion that Congress establish a federal regulatory regime to govern arbitration agreements.

Hearing Witnesses:

1. Mr. Victor E. Schwartz, Co-Chair, Public Policy Practice Group, Shook, Hardy & Bacon LLP
2. Ms. Joanne E. Grace, Registered Nurse
3. Prof. Myriam Gilles, Professor of Law, Benjamin N. Cardozo School of Law, Yeshiva University
4. Ms. Gretchen Carlson, Journalist and Co-Founder, Lift Our Voices

Member Opening Statements:

Full Committee Chairman Richard Durbin (D-IL):

• He remarked that forced arbitration agreements undermine the Seventh Amendment’s right to a jury trial for tens of millions of Americans.
  • He noted how these forced arbitration agreements are often included in the “fine print” of employment contracts, product manuals, and terms of service.
• He showed a video of individuals that were denied their ability to access the formal U.S. legal system due to forced arbitration clauses.
• He then described forced arbitration agreements as pervasive and noted how these agreements impact more than 60 million workers.
  • He highlighted how an estimated 825 million consumer arbitration agreements had been enforced in 2018 and commented that this figure has likely increased during the ensuing years.
• He noted how 90 percent of U.S. consumers are unaware that they had agreed to forced arbitration clauses when they purchase certain products.
  • He commented that consumers will agree to forced arbitration agreements when they accept a product’s terms of service and expressed doubts that most consumers realize that they have approved such agreements.
• He stated that the rules governing forced arbitration agreements often limit the information that victims can obtain from corporations, which can undermine their ability to prove their claims.
• He remarked that the arbitrators overseeing arbitration processes can be biased in favor of one side.
  • He asserted that these arbitrators tend to favor corporations when adjudicating disputes because arbitrators want to ensure future business.
• He also noted how arbitrators are not bound by precedent and how decisions from arbitrators are subject to limited judicial review.
• He remarked that the secretive nature of the arbitration process further compounds the process’s problems and commented that these problems are especially pronounced in cases involving sexual assault and sexual harassment.
  • He recounted how former Fox News CEO Roger Ailes had used confidential arbitration proceedings to conceal their predatory activities.
• He thanked Ms. Carlson for her work to expose Mr. Ailes’s predator behavior and mentioned how Congress had successfully enacted the bipartisan Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.
  • He explained that this law prohibits forced arbitration in cases of sexual assault and sexual harassment.
• He remarked that Congress must build upon the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.
  • He asserted that forced arbitration agreements are being used to cover up illegal age discrimination, racial discrimination, abuses in nursing care, and other harms.
• He stated that Americans deserve their right to a jury trial under the Seventh Amendment and called on Congress to preserve this right.

Full Committee Ranking Member Lindsey Graham (R-SC):

• He mentioned how he had cosponsored the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 and stated that Americans should not forfeit their right to a jury trial for sexual harassment and sexual assault as part of an employment contract.
  • He noted how this legislation had been passed into law and commented that Ms. Carlson had been instrumental in passing this legislation.
• He also expressed support for the Protecting Older Americans Act of 2023, which would enable employees to pursue age discrimination cases through the U.S. court system.
  • He asserted that forced arbitration agreements within the context of employment age discrimination cases does not serve the public interest.
• He then remarked that while arbitration itself is a fine means of dispute resolution for companies, he expressed concerns that forced arbitration agreements within the employment contract context often advantage employers over employees.

Witness Opening Statements:

Ms. Gretchen Carlson (Journalist, Lift Our Voices):

• She recounted how she had sued former Fox News Chair and CEO Roger Ailes for sexual harassment and described this action as the toughest decision of her life.
• She stated that her lawsuit against Mr. Ailes could have never received any publicity due to her employment contract’s forced arbitration clause.
  • She commented that most people do not accept jobs expecting that they will be subjected to sexual harassment and are unaware of forced arbitration clauses.
• She mentioned how she had been told not to worry about her employment contract’s forced arbitration clause because these clauses were becoming a standard feature of all employment contracts.
  • She asserted that employees do not realize that accepting forced arbitration clauses as part of their employment contracts can strip them of their rights to pursue justice in the future.
• She thanked survivors of sexual misconduct and Congress for their work to empower survivors of sexual misconduct to seek justice through the U.S. court system.
  • She described President Biden’s signing of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 into law as one of the proudest moments of her life.
• She stated that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 is already having significant impact.
  • She recounted multiple recent stories of employees being now able to bring sexual harassment claims against their employers as a result of this law.
• She remarked that all Americans deserve the right to bring cases through the court system rather than be required to have their claims adjudicated through arbitration.
• She expressed support for the Protecting Older Americans Act of 2023 and the Ending Forced Arbitration of Race Discrimination Act of 2023.
  • She commented that these bills would provide Americans (rather than companies or the government) with a choice regarding whether or how to seek accountability.
• She recounted the experience of two former Tesla employees that had reported racist behavior at their California plant and noted how these employees had been forced into the arbitration process when pursuing their claims.
  • She also recounted how a nursing home resident’s family had been forced to pursue arbitration to resolve a wrongful death claim against the nursing home for the nursing home’s negligence in their grandmother’s death.
• She stated that the U.S. Chamber of Commerce had claimed that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 would result in a slew of new cases that would drive companies out of business.
  • She commented that this prediction had not come to fruition and that this law had simply empowered sexual misconduct survivors with a choice regarding how to pursue their claims.
• She concluded that all Americans deserve the right to decide whether to pursue their claims through the U.S. court system (rather than be required to pursue claims through arbitration).

Prof. Myriam Gilles (Benjamin N. Cardozo School of Law, Yeshiva University):

• She remarked that forced arbitration clauses in “take it or leave it” contracts remove cases from public courts and place the cases in secretive proceedings harm all Americans.
• She discussed how all Americans are subject to forced arbitration clauses in some aspect of their life.
  • She elaborated that these clauses are present in contracts for credit cards, employment, checking accounts, cellular phones, and nursing homes.
• She asserted that forced arbitration clauses strip agency away from Americans and further empower corporations.
• She stated that forced arbitration clauses prevent Americans from obtaining justice under federal laws that would otherwise be enforced through the court system.
  • She indicated that these laws include those governing consumer protection, antitrust, privacy, and discrimination.
• She contended that forced arbitration clauses effectively replace the laws enacted by Congress with private legislation written by corporations into the fine print of contracts.
  • She commented that these rules generally go unread and cannot be negotiated.
• She then recounted how a jury verdict in a recent antitrust case against the real estate industry had resulted in a settlement that would change how Americans purchase homes.
  • She indicated that this settlement would reduce commissions and open up competition among real estate agents.
  • She called it “total happenstance” that most real estate brokers did not impose forced arbitration clauses on their clients and commented that such clauses would have prevented this settlement.
• She also recounted a 2016 case brought by Hewlett-Packard employees alleging that the company violated the Age Discrimination in Employment Act of 1967 (ADEA) through terminating the employees based on their age.
  • She noted that while 140 of these employees had signed releases that included forced arbitration clauses, she indicated that 320 of these employees had refused to sign the releases.
  • She indicated that the employees not subject to the forced arbitration clauses had been able to continue pursuing their claims through the court system and had recently achieved a settlement for $18 million (which is the highest per-plaintiff settlement ever recovered in an age discrimination suit).
  • She called it unfair that the workers that were subject to forced arbitration clauses could not pursue their age discrimination claims in court.
• She discussed how Congress enacts laws to protect Americans and stated that the enforcement of many of these laws relies upon courageous individuals bringing lawsuits challenging harmful and sometimes long-standing policies and practices.
  • She lamented how forced arbitration clauses deny individuals the right to bring such challenges and deprives the public of the ability to know what is occurring within the marketplace.
• She stated that forced arbitration agreements are not cheaper, faster, or easier and commented that consumers would willingly enter into such agreements if this were the case.
  • She asserted that companies impose forced arbitration agreements to eliminate cases and immunize themselves against public accountability.
• She then discussed the trend of mass arbitration in which victims simultaneously file thousands of individual arbitrations.
  • She commented that mass arbitration forces corporations to face claims of wrongdoing and make good on their contractual promises to pay the cost of arbitrating large numbers of individual claims.
• She called it unsurprising that companies faced with mass arbitrations will often go to courts to seek relief from their own contracts.
  • She noted that while the U.S. Chamber of Commerce has described mass arbitration as a form of extortion, she indicated that federal judges overseeing mass arbitration cases have described the cases as “poetic justice.”
• She remarked that the resistance that corporations have to individually arbitrating their cases indicates that forced arbitration has never been about fairness or efficiency.
  • She asserted that forced arbitration clauses are instead meant to suppress worker and consumer cases.

Mr. Victor E. Schwartz (Shook, Hardy & Bacon LLP):

• He first noted how the cost of arbitration is far less than the cost of litigation and highlighted how litigation is often prone to delays.
  • He indicated that arbitration cases are heard immediately while litigation cases can take more than a year to be heard.
• He then stated that claimants benefit from arbitration because it is simpler than litigation and does not require claimants to go to court to have their cases heard.
  • He commented that arbitration enables claimants to pursue their cases on their own schedules.
• He asserted that claimants that pursue their cases through litigation receive the same amount of money as claimants that pursue their cases through arbitration.
• He also discussed how it can be very difficult for a claimant to obtain a plaintiff’s attorney in an employment case unless the contingency fee is very substantial.
  • He explained that the amount of money involved in employment cases is not high enough for most attorneys to justify working on the cases.
• He then disputed the assertion that arbitration clauses are forced in most instances and noted how consumers can often find companies that will offer products and services without forced arbitration clauses.
  • He added that consumers maintain the right to forgo a product or service if they averse to agreeing to a forced arbitration agreement.
• He acknowledged that while forced arbitration clauses might be included in the fine print of a long contract, he indicated that courts could deem these clauses unconscionable if the clauses are improper.
• He also stated that individuals can tell public officials about the results reached in arbitration cases and noted how courts have stricken down gag orders related to these cases.
  • He commented that the Committee’s hearings on forced arbitration clauses have been helpful in spurring state courts to strike down gag orders.
• He further asserted that post-dispute arbitration is an ineffective means for resolving cases because parties involved in such cases will attempt to rig the process for their own benefit.
• He lastly stated that businesses do not prevail more when using arbitration relative to litigation.

Ms. Joanne E. Grace (Registered Nurse):

• She remarked that she had been wrongfully terminated from her employer due to her age and asserted that her former employer is using forced arbitration agreements to steal her rights, her ability to speak out, and her dignity.
• She discussed how she had begun her career as a registered nurse in 1976 and mentioned how she had become a patient advocate following her health system’s acquisition by Steward Health System.
• She recounted how Steward Health System had hired a new director of nursing in 2020 and stated that the company’s overt ageism had begun at this point.
  • She mentioned how older employees had been replaced by younger employees following this hiring.
  • She also testified that the director of nursing had made frequent comments about her age and medical condition to embarrass her.
• She stated that Steward Health System’s human resources (HR) department had dismissed her allegations of age discrimination and had called her an “old warrior.”
  • She expressed frustration with the HR department’s response to her age discrimination allegations.
• She recounted how Steward Health System had posted a job description on its website during her bout with COVID-19 and asserted that this job description was for her position (albeit with a different title).
• She testified that her position had been reduced following her return from her bout with COVID-19 and indicated that her position had been the only reduced position.
  • She mentioned how Steward Health System had hired a young person to replace her position and indicated that this person did not meet the minimum experience requirements for a supervisor.
• She remarked that her reduction had been a lie to force her out of her position and commented that the experience had devastated her.
  • She contended that Steward Health System’s reduction of more experienced nursing staff had imperiled patient safety.
• She mentioned how she had hired an attorney to sue Steward Health System for age discrimination and asserted that she had filed this lawsuit to protect other nurses and to keep patients safe.
• She stated however that Steward Health System had sought to force her to engage in an arbitration proceeding.
  • She testified that she had never signed a forced arbitration agreement and noted that Steward Health System had claimed that she had attended a training about arbitration (which she denied attending).
  • She indicated that Steward Health System had argued that her continued work for the company following the training session had meant that she had forfeited her right to pursue litigation against the company in the court system.
• She remarked that her forced arbitration agreement with Steward Health System advantages Steward Health System because it only permits her to call one witness from Steward Health System and caps the number of documents she can request at 25 documents.
• She also stated that her forced arbitration agreement with Steward Health System empowers Steward Health System to pick the pool of potential arbitrators.
  • She commented that the arbitrators tend to be defense-oriented attorneys.
• She further noted how the results of her arbitration case will remain secret and stated that this will prevent change from occurring.
• She concluded that federal legislation is required to end the practice of forced arbitration agreements in the context of employment age discrimination cases.

Congressional Question Period:

Full Committee Chairman Richard Durbin (D-IL):

• Chairman Durbin thanked Ms. Grace for sharing her negative forced arbitration agreement experience with the Committee and expressed his interest in working with Ms. Grace to reform federal forced arbitration agreement policy. He asked Ms. Grace to confirm that she had never affirmatively opted into a forced arbitration agreement.
  • Ms. Grace testified that she had never affirmatively opted into a forced arbitration agreement. She stated however that other employees of Steward Health System had signed forced arbitration agreements.
• Chairman Durbin then discussed how Roku had recently updated its dispute resolution terms to require binding arbitration. He noted how Roku no longer allows customers to continue using their devices to stream video unless they agree to the company’s new terms of service. He stated that consumers can only opt out of this binding arbitration provision through mailing a physical letter to Roku’s general counsel that contains various pieces of information. He indicated that this information includes the names of each person opting out, contact information for these people, information about the specific Roku products owned, the software in the products, the email address associated with the Roku account, and a copy of the purchase receipt (if applicable). He emphasized that Roku will not accept opt-out notices submitted via other means (such as via email). He asked Mr. Schwartz to answer whether Roku’s new contract ought to be honored. He also asked Mr. Schwartz to comment on how people are often assumed to have entered into forced arbitration agreements (even if the people did not affirmatively enter into the agreements).
  • Mr. Schwartz remarked that people should be able to opt out of arbitration agreements within the context of age discrimination. He stated that conflicts surrounding age discrimination are very different from conflicts surrounding products. He commented that “carefully drawn rules” should regulate age discrimination provisions within employment contracts. He then remarked that federal regulation of arbitration agreements would be preferable relative to having state courts oversee this space. He acknowledged that while some arbitration agreements may be unfair, he stated that it can be difficult to make such determinations. He asserted that federal regulation of arbitration agreements would provide more clarity to all parties. He added that federal regulation would be especially important in areas of controversy, such as disputes involving age, military, children, and nursing homes.

Full Committee Ranking Member Lindsey Graham (R-SC):

• Ranking Member Graham expressed receptiveness toward Mr. Schwartz’s suggestion that Congress establish a federal regulatory regime to govern arbitration agreements. He then asked Ms. Grace to indicate whether Steward Health System had applied increasing levels of scrutiny to their employees as the employees aged.
  • Ms. Grace answered affirmatively.
• Ranking Member Graham asked Ms. Grace to indicate the difference between her prior salary and the salary of the person that Steward Health System had hired to replace her.
  • Ms. Grace stated that the person that was hired to replace her had received a lower salary that she had received. She commented that Steward Health System sets its salaries largely based on experience. She testified that her salary as a patient advocate for Steward Health System had been $38 per hour and estimated that her replacement likely received around $25 per hour.
• Ranking Member Graham asked Prof. Gilles to indicate whether a common age discrimination practice is to replace older employees with younger employees.
  • Ms. Grace answered affirmatively.
• Ranking Member Graham interjected to comment that his question had been directed to Prof. Gilles.
  • Prof. Gilles expressed agreement with Ms. Grace’s response. She stated that employers seek out younger workers because these workers are cheaper. She noted how seniority in a job comes with higher wages and indicated that replacing older workers with younger workers can result in cost savings for companies.
• Ranking Member Graham then asked Prof. Gilles to indicate whether the plaintiff has the burden to prove their claim when bringing litigation through the court system.
  • Prof. Gilles answered affirmatively. She remarked that eliminating forced arbitration agreements would not result in plaintiffs winning all of their cases. She stated that the judges in the federal judicial system have “tremendous amounts of tools” to ensure that cases are valid and meritorious. She commented that federal judges use these tools every day.
• Ranking Member Graham asked Prof. Gilles to confirm that Rule 11 of the Federal Rules of Civil Procedure is a tool for ensuring that cases are valid and meritorious.
  • Prof. Gilles commented that Rule 11 of the Federal Rules of Civil Procedure is a useful tool for addressing problems. She also discussed how Rule 8 of the Federal Rules of Civil Procedure requires that plaintiffs plead their case in a manner that demonstrates that a problem actually exists. He called this a meaningful rule. She further noted how Rule 12(b)(6) of the Federal Rules of Civil Procedure provides the defendant’s attorneys with the opportunity to dismiss claims that lack legal merit. She remarked that there exist many tools that support lawyers and judges in ensuring the proper functioning of the legal system. She asserted however that forced arbitration agreements seek to jettison rules, laws, and precedents and instead employ a private system for resolving disputes.
• Ranking Member Graham noted how Ms. Grace had indicated that she had only been permitted to call one witness as part of her forced arbitration agreement. He asked Prof. Gilles to indicate whether this practice of limiting the number of witnesses during an arbitration proceeding is common.
  • Prof. Gilles answered affirmatively. She stated that arbitral providers tend to limit discovery as a way to ensure that their repeat clients will have lower costs and will not face a large number of depositions.
• Ranking Member Graham expressed hope that the Committee would consider the Protecting Older Americans Act of 2023. He also reiterated his receptiveness toward Mr. Schwartz’s suggestion that Congress develop federal guidelines for arbitration agreements. He remarked that he did not oppose arbitration as a general concept and stated that Americans should be permitted to pursue cases in the formal court system for certain types of claims (such as age discrimination and sexual harassment claims).

Sen. Sheldon Whitehouse (D-RI):

• Sen. Whitehouse discussed how the importance of trial by jury predates the adoption of the Seventh Amendment. He mentioned how English jurist William Blackstone had extolled the importance of juries as serving as a bastion against wealthy influences. He stated that corporations want to avoid the jury system because corporations cannot influence juries. He criticized the U.S. Supreme Court for seeking to limit access to jury trials and permit corporations to force Americans into binding arbitration proceedings. He stated that forced arbitration agreements are particularly impactful in high-volume low-dollar frauds. He commented that class actions are the only economically feasible means of addressing these frauds. He asked Prof. Gilles to discuss how forcing consumers into mandatory arbitration proceedings has enabled corporations to perpetrate low-dollar high-volume frauds.
  • Prof. Gilles mentioned how the U.S. Consumer Financial Protection Bureau (CFPB) had found in a 2015 study that most arbitration provisions combine a class action ban. She stated that most Americans will not pursue arbitration to resolve small dollar claims because the cost of pursuing such arbitrations for consumers exceeds the value of winning the arbitrations.
• Sen. Whitehouse interjected to posit a scenario in which a company imposes a fake $15 fee on all of its customers. He remarked that most people will not challenge the fee because the cost of hiring an attorney exceeds the amount of money that people will receive from successfully challenging the fee. He stated however that the company in this scenario may collect a large amount of money from this fake fee across all of its customers.
  • Prof. Gilles remarked that the adopters of Rule 23 of the Federal Rules of Civil Procedure had decided that there needed to exist a procedural pathway to allow small dollar claims into the court system. She stated that the absence of this pathway would enable corporations to infringe on consumer rights. She commented that most consumers would likely never realize that they are being subjected to an unnecessary fee. She remarked that companies may be engaged in illegal activities that are not receiving scrutiny because forced arbitration agreements are precluding class action lawsuits.
• Sen. Whitehouse asked Prof. Gilles to indicate whether arbitration proceedings are as fair as court proceedings. He commented that court proceedings have elaborate and well-developed procedural and substantive provisions to ensure fairness.
  • Prof. Gilles first stated that arbitration fees are “dramatically higher” than court fees. She noted how arbitrators are paid a daily rate that ranges between $1,000 per hour and $2,000 per hour. She emphasized that individuals do not need to pay judges to hear their cases. She then noted how the company being challenged in an arbitration case gets to choose the arbitral provider. She commented that this results in a “repeat player bias” in favor of corporations. She further mentioned how arbitration clauses often prohibit all forms of collective action. She asserted that this prohibition renders arbitration a non-viable pathway for most people. She then discussed how the rules of arbitral bodies limit discovery and other attempts to obtain evidence. She further stated that arbitration cases have “very limited” appellate rights. She concluded that the arbitration system is biased in favor of corporations by design.
• Sen. Whitehouse recounted how a state attorney general colleague had brought an action against an arbitration office when he had previously served as Rhode Island’s attorney general. He mentioned how this arbitration office was shut down because the office had been unfairly manipulating outcomes against claimants to benefit their corporate clients.

Sen. Tom Cotton (R-AR):

• Sen. Cotton first asked Mr. Schwartz to respond to Prof. Gilles’s assertion that arbitration fees are higher than court fees.
  • Mr. Schwartz noted how the American Arbitration Association’s rules cap arbitration fees at $300. He also mentioned a plaintiff that wins their arbitration proceeding will have their fees reimbursed.
• Sen. Cotton asked Mr. Schwartz to clarify whether the $300 arbitration fee is imposed on a daily basis.
  • Mr. Schwartz stated that the $300 arbitration fee is not imposed on a daily basis and is instead an immediate fee.
• Sen. Cotton then discussed how the court system’s purpose is to provide a fair and efficient system for wronged parties to have their claims decided. He asked Mr. Schwartz to indicate whether state and federal courts are currently backlogged and overburdened.
  • Mr. Schwartz answered affirmatively and stated that the COVID-19 pandemic had exacerbated these backlogs. He indicated that it now takes parties 18 months to have their claims heard in the court system. He noted how parties waiting to have their claims adjudicated often have medical expenses or limitations on their abilities to work. He stated that arbitration can allow for claims to be adjudicated much sooner.
• Sen. Cotton asked Mr. Schwartz to indicate whether arbitration can enable faster resolutions of claims relative to the court system.
  • Mr. Schwartz stated that the arbitration process is much faster than the court process in terms of resolving claims. He noted how courts often experience delays and must take time to select jurors. He then stated that the Committee should consider how class action lawsuits work in practice. He commented that the attorneys involved in class action lawsuits often receive a disproportionate amount of money relative to the aggrieved parties.
• Sen. Cotton also asked Mr. Schwartz to indicate whether plaintiffs in arbitration can recover the same kinds and amounts of damages that plaintiffs could receive in court.
  • Mr. Schwartz answered affirmatively. He mentioned how a Stanford Law Review study had found that damage amounts do not vary across arbitration and court settings.
• Sen. Cotton asked Mr. Schwartz to indicate whether arbitration is more flexible than the court system because it does not need to occur pursuant to a judge’s schedule.
  • Mr. Schwartz remarked that arbitration is more convenient for people with traditional jobs and families. He stated that traveling to court may be challenging for many Americans and emphasized that arbitration proceedings can occur in more convenient locations and at more convenient times.
• Sen. Cotton asked Mr. Schwartz to indicate whether claimants in the arbitration process can obtain a lawyer and use the discovery process to obtain relevant information to prove their claims.
  • Mr. Schwartz discussed how the discovery process can be lengthy, costly, and disruptive.
• Sen. Cotton then asked Mr. Schwartz to confirm that arbitration agreements and NDAs are not the same thing.
  • Mr. Schwartz answered affirmatively. He also noted how NDAs can be used in litigation settlements. He stated that a person cannot be prevented from discussing their arbitration case.
• Sen. Cotton asked Mr. Schwartz to confirm that arbitration is less expensive and quicker than traditional litigation, that claimants using arbitration perform the same as claimants using litigation, that claimants can decide whether to discuss their claims, and that claimants can obtain more money through the arbitration process because of the lower legal fees.
  • Mr. Schwartz noted how many claimants cannot currently obtain an attorney to litigate their claims because the contingency fee system does not provide an adequate reward for the plaintiff’s attorney. He commented that these claimants must either pursue arbitration or not pursue their claims.
• Sen. Cotton stated that the aforementioned dynamics have led federal law and policy to generally favor arbitration since the enactment of the United States Arbitration Act.
  • Mr. Schwartz remarked that the U.S. Supreme Court has been in general agreement in terms of respecting the United States Arbitration Act.

Sen. Amy Klobuchar (D-MN):

• Sen. Klobuchar mentioned how she serves as Chairman of the Committee’s Subcommittee on Competition Policy, Antitrust, and Consumer Rights. She raised concerns that some forced arbitration agreements frustrate the purpose of federal antitrust laws. She also expressed her disappointment with the U.S. Supreme Court’s American Express v. Italian Colors Restaurant decision. She commented that this ruling had allowed for American Express to employ forced arbitration agreements, even though the use of these agreements would make it difficult to enforce existing laws. She mentioned how Associate Justice Elena Kagan’s dissent in American Express v. Italian Colors Restaurant had argued that the forced arbitration provision in the case had violated Sherman Antitrust Act of 1890 because it deprived parties of the opportunity to challenge alleged monopolistic conduct. She also stated that larger companies are able to negotiate better arbitration fees or clauses than smaller companies. She asked Prof. Gilles to elaborate on her assertion that forced arbitration agreements interfere with antitrust and other laws.
  • Prof. Gilles mentioned how the owner of Italian Colors Restaurant had previously testified before the Committee that larger companies had been able to pursue litigation against American Express because these larger companies have more market power. She noted how American Express could not bind the larger companies to forced arbitration agreements. She stated that the fact that Italian Colors Restaurant had been subject to a forced arbitration agreement had prevented the restaurant from holding American Express responsible for alleged antitrust violations. She discussed how small businesses play a key role in enforcing U.S. laws and highlighted how small businesses play a special role in enforcing U.S. antitrust laws. She explained that small businesses are often the victims of antitrust violations and anti-competitive behaviors.
•  Sen. Klobuchar lamented that Congress has failed to enact reforms to federal antitrust laws. She noted that while the Committee had advanced several bipartisan antitrust reform bills, she indicated that Congress has not passed these bills. She mentioned how she had successfully passed one bill into law in 2022 that would amend merger filing fees so that federal antitrust agencies would be better funded. She indicated however that this law’s funding has not gone to federal antitrust agencies as required. She stated that this situation demonstrates the importance of having private companies help enforce U.S. antitrust laws. She then thanked her colleagues for their work to pass the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 into law. She asked Ms. Carlson to discuss the positive impacts of this law.
  • Ms. Carlson remarked that employers are still attempting to force victims of sexual misconduct into arbitration. She highlighted how the onus remains on the employee to understand that they are not required to use arbitration to resolve their claims. She testified that she has spoken to many women that have alleged that their companies are attempting to force them to pursue arbitration to resolve harassment claims. She recounted how a bartender that had experienced harassment had been able to pursue her harassment claim in court because of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. She also mentioned how a Texas judge had recently denied Blaze Media’s attempt to dismiss a sexual harassment case based on this law. She asserted that the U.S. should work to educate the public on the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. She commented that companies are unlikely to publicize the fact that their employees can now pursue avenues outside of the arbitration process for resolving sexual misconduct claims. She further called on Congress to pass the Protecting Older Americans Act of 2023 and the Ending Forced Arbitration of Race Discrimination Act of 2023. She commented that the U.S. must protect against all human rights violations that occur within the workplace. She further asserted that her sexual harassment experience would have never been made public if she had been forced to pursue her claims through arbitration. She stated that the publicization of sexual harassment experiences had helped to spur the Me Too movement.

Sen. Marsha Blackburn (R-TN):

• Sen. Blackburn discussed her work to help pass the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 and commented that this law was needed. She further thanked Ms. Carlson for her advocacy in favor of this law and the Speak Out Act. She also expressed agreement with Sen. Tom Cotton (R-AR) that arbitration can serve as a beneficial tool for avoiding lengthy and costly litigation. She expressed opposition to efforts to expand the prohibition on arbitration beyond the context of sexual assault and harassment. She lastly expressed agreement with Ms. Carlson’s statements regarding the need to educate employees that forced arbitration agreements are prohibited for claims of sexual assault and harassment.

Sen. Mazie Hirono (D-HI):

• Sen. Hirono noted how the U.S. Supreme Court had approved the use of forced arbitration clauses through its various decisions. She asked Prof. Gilles to indicate whether it would be legal malpractice for an attorney to not counsel their corporate clients to include arbitration clauses within their employment contracts.
  • Prof. Gilles answered affirmatively and stated that forced arbitration agreements are the best means for corporations to immunize themselves from all legal liabilities.
• Sen. Hirono discussed how it can be difficult for people that have experienced workplace sexual harassment and sexual assault to come forward with their claims. She asked the witnesses to identify other areas where forced arbitration clauses may prevent people from lodging complaints. She suggested that workplace hate crimes could constitute one such area. She mentioned how she had helped pass the COVID-19 Hate Crimes Act to facilitate the reporting of hate crimes.
  • Ms. Carlson remarked that forced arbitration agreements deprive people of the right to decide how to best pursue their claims. She commented that the word “forced” is the operative word in the phrase “forced arbitration” and questioned how forced arbitration can be beneficial if it is mandatory. She stated that every study on forced arbitration agreements has found that most Americans do not support such agreements when the agreements are explained to them. She asserted that Americans desire the ability to choose their method for resolving their claims.
• Sen. Hirono asked the witnesses to indicate which party generally selects the arbitrator in employment-related disputes.
  • Prof. Gilles stated that the company generally selects the arbitrator in employment-related disputes. She asserted that companies tend to develop arbitration rules that will advantage them.
• Sen. Hirono posited a hypothetical law that would require the parties involved in a dispute to select their own arbitrators and that the arbitrators would then select a chair. She asked the witnesses to indicate whether this hypothetical system would result in fairer outcomes.
  • Prof. Gilles answered no. She discussed how the large arbitration service providers have many former judges and defense lawyers to choose from. She stated that consumers would not be equipped to determine which of these professionals would be the fairest reviewers of their cases. She stated however that companies (who frequently engage in arbitration) would tend to know which of these professionals would be more partial or antagonistic toward their interests. She commented that the power imbalance would therefore continue, even if consumers could influence which arbitrators would adjudicate their claims. She then discussed how fired Miami Dolphins coach Brian Flores had sought to bring a race discrimination case against the National Football League (NFL). She noted how the NFL’s arbitration clause states that the sole arbitrator for this case would be NFL Commissioner Roger Goodell. She remarked that NFL Commissioner Roger Goodell is unlikely to rule in Mr. Flores’s favor in this race discrimination lawsuit because Commissioner Goodell works on behalf of NFL teams. She expressed skepticism that Commissioner Goodell could take an unbiased approach in this case. She asserted that similar dynamics exist in other contexts.
• Sen. Hirono asked Prof. Gilles to indicate whether Congress should revisit the United States Arbitration Act.
  • Prof. Gilles noted how Congress had revisited the United States Arbitration Act when Congress had passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. She applauded Congress’s passage of this law. She remarked that Congress should further revisit the United States Arbitration Act and expressed support for the FAIR Act. She explained that the FAIR Act would amend the United States Arbitration Act so that the law does not apply to pre-dispute forced arbitration provisions imposed upon consumers, workers, and small businesses.
• Sen. Hirono expressed interest in having Congress revisit the United States Arbitration Act.

Sen. Cory Booker (D-NJ):

• Sen. Booker lamented how rich and guilty Americans often receive better justice than poor and innocent Americans. He also stated that corporate power has grown dramatically in the U.S. at the expense of workers. He then thanked Ms. Carlson for her advocacy for the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 and asserted that this law has positively impacted U.S. culture. He noted how critics of this law had claimed that the law would burden the court system, increase costs, and extend the length of lawsuits. He stated however that these claims had not come true. He remarked that corporations have instead found it cheaper to create cultures that support workers. He further thanked Ms. Carlson for her continued advocacy for ending forced arbitration agreements for workers that have experienced discrimination based on race, age, disability, gender, and sexual identity. He asked Ms. Carlson to discuss why the U.S. should work to end forced arbitration agreements for all workers.
  • Ms. Carlson remarked that forced arbitration was never supposed to be used to adjudicate human rights violations. She stated that forced arbitration was instead intended to resolve small business disputes and reduce the court system’s caseload. She asserted that forced arbitration should not be used to resolve racial discrimination, sexual assault, or age discrimination. She also expressed agreement with Sen. Booker’s comments on how the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 had positively impacted U.S. culture. She stated that the law’s empowering of employees to bring sexual assault and sexual harassment claims through the formal court system discourages employers from engaging in predatory behavior in the first place. She asserted that changing culture is a more difficult task than passing legislation.
• Sen. Booker expressed frustration that the U.S. Senate is addressing the use of arbitration for discrimination cases on a piecemeal basis. He asserted that the U.S. Senate should instead take a broader approach to the issue. He then asked Ms. Grace to discuss the value that she sees in using the court system (rather than using arbitration) to resolve her age discrimination claims.
  • Ms. Grace mentioned how she had held an expectation that her company would act in her best interest given her years of service to the company. She stated that other older Americans must be vigilant toward their employers to ensure that the employers are not seeking to harm them. She asserted that companies are employing forced arbitration agreements to conceal their illegal activities. She also warned that age discrimination within the context of nursing can harm patients because older nurses tend to have more wisdom than less experienced nurses. She called on Congress to ban the use of forced arbitration agreements within the context of age discrimination.

Sen. Thom Tillis (R-NC):

• Sen. Tillis first asked Ms. Carlson to indicate when she had first testified before the U.S. Senate Committee on the Judiciary.
  • Ms. Carlson indicated that she did not know whether she had testified before the U.S. Senate Committee on the Judiciary. She noted however that she had previously testified before the U.S. House Committee on the Judiciary both before and during the COVID-19 pandemic.
• Sen. Tillis commented that Ms. Carlson has worked on addressing forced arbitration agreements for some period of time without achieving her full goals. He then remarked that prospective employees must know whether their potential employers use forced arbitration clauses within their employment contracts. He stated that while employees have the right to due process of law, he asserted that employees do not have the right to a certain type of employment contract. He acknowledged however that employers have abused forced arbitration clauses to cover sexual misconduct and age discrimination. He stated that arbitration agreements can be useful and should be permitted in certain contexts. He asked Mr. Schwartz to recommend an optimal system for arbitration that would enable arbitration’s continued existence while banning the use of arbitration in certain contexts.
  • Mr. Schwartz noted how state courts have ruled that gag orders related to arbitration decisions unconscionable and not enforceable. He stated that people that disagree with the results of their arbitration proceedings should be able to publicly discuss said results. He commented that this ability to discuss the results of arbitration proceedings is a free speech issue. He then remarked that there should exist federal regulation of arbitration agreements. He stated that this regulation would ensure that the U.S. maintains the benefits of arbitration while addressing potential arbitration abuses. He emphasized that arbitration is generally cheaper and faster than litigation.
• Sen. Tillis reiterated his assertion that arbitration has many benefits and that Congress should not fully ban arbitration. He stated however that there do exist certain contexts where the use of arbitration to resolve disputes is inappropriate. He expressed interest in working on a legislative solution that would selectively prohibit arbitration in certain contexts while preserving the use of arbitration agreements when it is more efficient.
  • Mr. Schwartz expressed his willingness to help Sen. Tillis on this effort.

Sen. Laphonza Butler (D-CA):

• Sen. Butler discussed how unionization is an important tool for empowering workers. She highlighted how arbitration is often used within the labor union context to ensure that conflicts between employers and employees are fairly decided. She noted how labor union arbitrations tend to involve panels that are jointly chosen by the labor union and the employer. She suggested that this labor union model for arbitration could inform improvements to the U.S.’s arbitration system. She then expressed support for the efforts of Tesla workers to form a labor union. She noted however that U.S. labor laws do not permit certain categories of workers to unionize. She asked Ms. Carlson to recommend new tools that Congress could take up to advance human rights protections for workers.
  • Ms. Carlson stated that she has focused on expanding access to the court system for protected classes of Americans. She commented that this approach improves the likelihood that such expansions will receive bipartisan support. She expressed support for both the Protecting Older Americans Act of 2023 and the Ending Forced Arbitration of Race Discrimination Act of 2023. She remarked that her main objective is to empower workers to choose whether to pursue their claims through either the arbitration or court process. She stated however that many workers will not bring claims against their employers because these claims are often difficult to prove. She asserted that prohibiting forced arbitration agreements would therefore not result in a significant increase in the number of worker claims filed.
• Sen. Butler then noted how Prof. Gilles had asserted that forced arbitration agreements can exacerbate economic inequality. She commented that a major benefit of the labor movement has been better pay equity. She asked Prof. Gilles to discuss how forced arbitration agreements impact female workers and workers of color.
  • Prof. Gilles mentioned how studies have found that women and minorities tend to work in fields where forced arbitration agreements are more frequently employed. She also stated that women and minorities are the least likely groups to bring claims in court and commented that this trend predates the advent of forced arbitration agreements. She suggested that the fear of retaliation can discourage women and minorities from filing claims against their employers. She also discussed how low-income Americans are often ill-equipped to navigate the U.S. legal system, which can lead these Americans to not pursue their claims. She added that low-income Americans generally cannot afford to leave their jobs and tend not to have access to jobs without forced arbitration agreements. She concluded that forced arbitration agreements are exacerbating the U.S.’s economic inequities.

Full Committee Chairman Richard Durbin (D-IL):

• Chairman Durbin noted how proponents of forced arbitration agreements claim that pursuing claims through arbitration is easier, cheaper, faster, and just as fair as pursuing cases through court. He questioned why arbitration must be forced if it possesses the aforementioned benefits. He remarked that Americans should have the right to decide whether to pursue their claims through the court system or through arbitration. He then expressed interest in working to advance the Protecting Older Americans Act of 2023.