Judgment Deferred: How Mandatory Arbitration Has Built a Legal System Beyond Public Reach
When Maria Delgado signed her employment agreement at a regional financial services firm in Phoenix, she did not pause on page eleven. Few people do. Buried in a dense paragraph beneath a bolded subheading labeled "Dispute Resolution," the clause informed her that by accepting employment, she agreed to resolve any future legal claims against the company — including claims of discrimination, harassment, or wage theft — through binding arbitration, and that she waived her right to participate in any class action lawsuit. She signed. She did not know, at the time, that she had effectively surrendered her access to the American court system.
Three years later, after alleging that a supervisor had subjected her to a sustained pattern of sexual harassment that the company's human resources department declined to address, she learned what that signature meant in practice.
The Architecture of Private Justice
Mandatory arbitration is not, in principle, a sinister instrument. Arbitration has a long and legitimate history as a mechanism for resolving commercial disputes between sophisticated parties — corporations, financial institutions, and business partners who negotiate the terms of their agreements from positions of relative equality. What has transformed it into a subject of serious legal and democratic concern is its systematic extension into relationships defined by profound power asymmetry: employer and employee, corporation and consumer, lender and borrower.
The legal architecture enabling this expansion was largely constructed by the Supreme Court. Beginning with a series of decisions in the 1980s and accelerating through the 2010s, the Court interpreted the Federal Arbitration Act of 1925 — a statute originally intended to govern commercial contracts — with expanding breadth, holding that arbitration clauses are enforceable in employment and consumer contexts and that class action waivers bundled with those clauses are similarly valid.
The 2011 decision in AT&T Mobility v. Concepcion and the 2018 ruling in Epic Systems Corp. v. Lewis were particularly consequential. Together, they established that employers could require workers to arbitrate claims individually and could prohibit them from joining collective actions, even when individual claims were too small to litigate economically on their own. The practical effect was to render entire categories of legal harm — low-wage theft, widespread consumer fraud, systemic workplace discrimination — effectively unreviewable.
"When you eliminate the class action mechanism, you don't just limit one legal tool," said Professor Angela Whitmore, a contracts and civil procedure scholar at Georgetown University Law Center. "You eliminate the only economically rational pathway for addressing widespread, low-dollar harms. That's not an accident. It's the point."
Scale and Invisibility
The scale of mandatory arbitration's reach is difficult to overstate. A landmark study by the Economic Policy Institute estimated that more than 60 million American workers are currently subject to mandatory arbitration agreements — a figure that represents more than half of the non-union private sector workforce. A separate analysis by the Consumer Financial Protection Bureau found that arbitration clauses govern hundreds of millions of consumer financial contracts, covering credit cards, bank accounts, payday loans, and a broad range of other financial products.
The arbitration industry itself — dominated by a small number of private firms, most prominently the American Arbitration Association and JAMS — operates largely beyond public view. Arbitration proceedings are almost universally confidential. Awards are rarely published. Arbitrators are not required to follow legal precedent, and their decisions are subject to judicial review only on extremely narrow grounds — fraud, corruption, or arbitrator misconduct — that are almost never successfully invoked.
This confidentiality has consequences that extend well beyond individual cases. When a company sexually harasses multiple employees and each case is resolved through confidential arbitration, no public record accumulates. No pattern becomes visible. No jury ever hears the evidence. The institutional behavior that might, in a public court system, generate reputational consequences, regulatory attention, or legislative response instead disappears into sealed files.
The #MeToo movement offered a rare, partial window into this dynamic. Many of the workplace misconduct cases that became public in 2017 and 2018 involved arbitration agreements that had kept earlier complaints confidential for years, allowing patterns of behavior to continue unaddressed. The arbitration system had not resolved those disputes — it had suppressed them.
The Arbitrator's Dilemma
Critics of mandatory arbitration frequently point to a structural feature of the system that raises fundamental questions about neutrality: arbitrators are typically selected by the parties to a dispute, but in practice, the repeat-player dynamics of the system create structural incentives that favor institutional defendants.
A corporation that routinely faces employment or consumer claims will appear before arbitrators repeatedly. Individual claimants, by contrast, will typically appear in arbitration once. Arbitrators who develop reputations for ruling against corporate defendants may find themselves less frequently selected by those defendants in future cases — a selection dynamic that does not require explicit bias to produce systematically skewed outcomes.
Academic research has documented this pattern. A study published in the Journal of Empirical Legal Studies found that in employment arbitration, employees prevailed in roughly 21 percent of cases, compared to win rates exceeding 50 percent in federal employment litigation. Award amounts in successful employee cases were also substantially lower in arbitration than in comparable court proceedings.
The arbitration industry disputes these characterizations, arguing that arbitration is faster, less expensive, and more accessible than litigation for individual claimants. Speed and cost savings are real in some contexts. But critics note that a cheaper, faster process is of limited value when the outcome is systematically predetermined.
Legislative Responses and Their Limits
Congress has taken limited steps to address specific arbitration abuses. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, signed into law in 2022, prohibits the enforcement of pre-dispute arbitration agreements in cases involving sexual misconduct — a meaningful reform for a specific category of harm. A subsequent amendment extended similar protections to claims involving race discrimination.
But these carve-outs, while significant, leave the broader architecture of mandatory arbitration intact. Wage theft, consumer fraud, age discrimination, disability discrimination, and a wide range of other legally cognizable harms remain subject to mandatory arbitration agreements that courts will generally enforce.
The Consumer Financial Protection Bureau has intermittently attempted to restrict arbitration clauses in financial products. A rule issued in 2017 that would have prohibited class action waivers in consumer financial contracts was repealed by Congress within months of its publication, under the Congressional Review Act, before it could take effect.
The Democratic Stakes
The expansion of mandatory arbitration is not merely a legal or procedural question. It raises fundamental issues about the relationship between citizens and the institutions — corporate and governmental — that shape their lives.
The right to a jury trial is guaranteed by the Seventh Amendment. The right to access courts to seek redress for legal wrongs is a foundational principle of the rule of law. Mandatory arbitration does not formally abolish these rights — it contractually waives them, through agreements that millions of Americans sign without meaningful understanding of their consequences, in contexts where declining to sign typically means declining the job, the credit card, or the service.
The result is a two-tiered legal system: one for those with resources and leverage sufficient to negotiate their way out of arbitration clauses, and another — operating in the dark, without juries, without precedent, without public accountability — for everyone else. The question of whether that arrangement is consistent with the democratic promise of equal justice under law is one that the courts, so far, have declined to answer.