What Is Forced Arbitration? | Consumer Protection Laws
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What Is Forced Arbitration?

Forced ArbitrationArbitration can be a great way to resolve disputes when mediation and litigation are not options. However, sometimes arbitration isn’t necessarily the best option. Employment and consumer contracts often include mandatory arbitration, also known as “forced arbitration.” While originally intended to help resolve disputes, it may not necessarily be in your interests to do so.

Here’s what you should know about forced arbitration in Massachusetts and New Hampshire and how an experienced consumer protection attorney can assist you.

Arbitration 101

Arbitration is a way to settle a dispute without appearing in court. Parties bring their disagreement(s) to a neutral third party called an arbitrator, who examines the facts, hears both sides of the matter, and then offers a legally binding judgement. Arbitration is generally less formal and less expensive than litigation, but more structured than working with a mediator.

Issues With Forced Arbitration

Most arbitrations are initiated by a contract provision, which states that any disputes resulting from the contract would be resolved by an arbitrator. Arbitration terms might be straightforward, indicating that disputes will be resolved in accordance with relevant arbitration laws.

However, they can also  be more complicated, governing the selection of arbitrators, the location of arbitral proceedings, who pays legal fees, and if the settlement amount can or cannot be disclosed. Some arbitration clauses are optional while others are mandatory, and the judgment of the arbitrator can either be binding or nonbinding.

Are Forced Arbitration Clauses Legal?

Forced arbitration clauses are often hidden in the small print of employment and consumer contracts, from mobile phone and credit card contracts to medical care. Consumers and workers are frequently made to sign these conditions to receive services or obtain employment, and they may be unaware that they have given up their rights under the law.

A forced arbitration clause usually states that in the case of a disagreement with a company, a customer or worker may not litigate their case and instead must seek out private arbitration in a process and environment created by the very corporation in question.

Arbitration Laws in Massachusetts

In 1632, Massachusetts was the very first settlement to pass legislation favoring arbitration as a method of resolving disputes. However, the Federal Arbitration Act (FAA) wasn’t enacted until 1925, in response to the judiciary’s unwillingness to enforce contracts that mandated arbitration. The Supreme Court would all but ignore these laws for the next sixty years after the adoption of the FAA, declining to rule on cases of arbitration clause enforceability.

Massachusetts’ equivalent of the FAA is the Massachusetts Uniform Arbitration Act. Except for the clause regarding the cancellation of other agreements, the Massachusetts Act adopted the FAA’s fundamental clause. This renders both pre- and post-dispute arbitration agreements legitimate, binding, and irreversible.

Although most states in the U.S. allow generous arbitration provisions in labor agreements, including forcing all employment conflicts to be addressed through arbitral proceedings, Massachusetts is one of the few that only requires an individual to arbitrate statutory claims of employment discrimination if both parties expressly agree to this in the contract.

Arbitration Laws in New Hampshire

New Hampshire’s arbitration laws govern applications to compel or stay arbitration, as well as the process for arbitrating domestic disagreements. While a portion of the legislation is predicated on the FAA, New Hampshire does not have arbitration laws founded on the original or the revised versions of the Uniform Arbitration Act.

Except in circumstances where there are valid reasons for contract cancellation, New Hampshire’s arbitration statutes are considered legally binding and irreversible. That said, these statutes are not applicable when there is an agreement to arbitrate between an organization and its workers or a labor union, unless that agreement specifically utilizes New Hampshire arbitration laws.

The FAA preempts state law up to the point that the two contradict each other; it does not prohibit state courts from implementing contract law statutes to establish whether the parties entered into a legitimate agreement to arbitrate. Because individual state arbitration laws are complex, it’s essential to work with a lawyer well-versed in consumer protection law.

How Forced Arbitration Impacts Consumers & Employees

There are many ways that mandatory arbitration clauses harm employees and consumers. The majority of compulsory arbitration agreements compel an individual to surrender their rights while still enabling the company to file suit.

People are also often required to pay exorbitant filing fees simply to start a claim, in addition to their portion of the arbitrator’s billable hours. Furthermore, mandatory arbitration provisions frequently allow companies to select the venue for arbitration, regardless of how expensive travel may be for the other party.

Because it’s usually only corporations who engage the services of an arbitrator on a regular basis, there is an incentive for arbitrators to rule in favor of the business if they want to be retained in the future. Mandatory arbitration agreements commonly limit a person’s capacity to gather key evidence and present their case.

Additionally, it’s difficult to successfully question an arbitrator’s ruling. Although transcripts of court hearings are publicly available, most mandated arbitration provisions state that sessions be kept private, even if the incident involves serious public safety and health concerns.

Contact a New Hampshire or Massachusetts Arbitration Lawyer Today

Are you or a family member bound by a mandatory arbitration agreement that you aren’t sure is in your best interests? Depending on the circumstances, forced arbitration can be more costly and leave you with fewer options than other avenues for dispute resolution. It’s important to consult with an experienced New Hampshire or Massachusetts arbitration lawyer to discuss your case in detail.

Mazow | McCullough, PC understand how detrimental mandatory arbitration can be for both consumers and employees, and we’re dedicated to providing legal assistance to residents who have been impacted by a company’s unscrupulous arbitration clauses. Contact us today to schedule an appointment for your consultation by dialing (978) 744-8000. Our team is available now to assist you.

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