Forced arbitration has grown so common in recent decades that more than 60 million workers in the U.S. are believed to be subject to these agreements, which have wormed their way into countless employment contracts. Across corporate America, the concept of mandatory arbitration—which dictates that employees and consumers settle legal claims in private—has served as a bulwark against expensive class action lawsuits.
This practice, which drew attention during the #MeToo movement for the role that forced arbitration played in suppressing sexual-misconduct claims, is typically slanted toward employers. But as The Lever reported this week, the imbalance of power in the arbitration process could be exacerbated further with a recent change introduced by the American Arbitration Association (AAA), the nonprofit organization that provides the majority of arbitration services worldwide.
As of this month, the cost of initiating a mass arbitration case—a way to address a large number of individual arbitration claims, akin to a class action lawsuit—has increased from $125 to $3,125, a notable shift for both employees and consumers seeking legal recourse through arbitration. The new fee is nonrefundable and will be required for any cases involving more than 25 individuals. (The Lever points out that AAA’s primary competitor, JAMS, charges $250 for consumers who pursue arbitration cases.)
This move seems to be, at least in part, a response to the rise in arbitration: The AAA noted on its blog that the fee was a result of the “increasing number of mass arbitration cases since 2018, primarily driven by arbitration clauses in consumer-business and employee-employer contracts.” (In 2022, the AAA’s revenue was almost $150 million—about double what it was a decade prior, according to ProPublica. When reached for comment, AAA pointed Fast Company to its blog post and press release explaining the fee change.)
But employees and consumers who pursue arbitration are already facing an uphill battle, one that will only prove more difficult with an initiation fee that increases the barrier to entry. Over the years, employers have borrowed from consumer contracts to ensure they can push cases into arbitration: More than 30% of employers who use forced arbitration include class action waivers in their arbitration agreements, according to a 2017 report by the Economic Policy Institute. Companies often manage to pick arbitrators that are likely to be sympathetic to their interests, and studies have found that the proliferation of arbitration cases has discouraged workers from filing claims for labor violations and has enabled companies to sidestep a significant portion of class action lawsuits.
As forced arbitration has become the status quo, some lawyers have sought to fight back by bombarding companies with individual arbitration claims and pursuing mass arbitration cases—a path that could be even harder with the AAA’s recent fee increase.
