Summer 2012 Issue

Forced Arbitration Threatens Consumers

A lawsuit is how most legal disputes are settled. But due to the explosion of forced arbitration, the option of a lawsuit is being made increasingly unavailable to consumers.

In arbitration, a case is decided by an arbitrator instead of by a judge or jury. Arbitration has been around for years and has long been used by business because it can be quicker than a trial and is confidential.

In the past 15 years or so, more and more companies, including banks, cellphone carriers, and brokerage, home builder and credit card companies, have put arbitration clauses in their contracts. Settling differences, once the product of informed negotiations between sophisticated parties to a contract, is now a “take-it-or-leave it” non option for the majority of Americans.

Arbitration is almost always bad for consumers. The fees to file an arbitration case are high, and claimants must pay the arbitrator, who can run hundreds of dollars per hour. Arbitration agreements often limit available remedies and offer no right to appeal. Finally, many arbitrators take the side of business in any dispute: a recent study reveals that one large arbitration organization sided with credit card companies a whopping 94 percent of the time.

Not only does arbitration not favor the consumer, but it is also not easy to avoid. Many companies do not let consumers opt out of arbitration clauses, and those that do often bury the requirements for doing so in the fine print, set impossible deadlines, or otherwise make carrying out the requirements hard to do. The law is also very friendly to arbitration: The Supreme Court has ruled time and again that the Federal Arbitration Act is to be interpreted broadly in favor of arbitration, and most states will enforce arbitration agreements in almost every case.

North Carolina Workers’ Compensation

The Raleigh News and Observer today highlighted several bills that will be presented by our legislators this year. The group’s intentions are to ensure that employers are providing proper worker’s compensation coverage for their employees and to provide information to employees about their employers’ insurance coverage.

A change, enacted in June, by the General Assembly allowed employers to shield their workers from information about their company’s compensation coverage. This change prevents workers from determining whether they will be protected in the event of a work-related accident. An injured worker without coverage typically faces accumulating medical expenses, loss of income and an inability to perform the tasks associated with their position.

The News and Observer reported last April that 30,000 or more qualifying employers are not insured in the state of North Carolina. There are additional concerns with employers classifying their workers as independent contractors. While we at Parker & Frey PLLC applaud the efforts of lawmakers to examine their earlier decision, we remain concerned about the plight of the North Carolina worker. Are you currently covered by workers’ compensation at your job?