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Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration

52 Pages Posted: 5 Nov 2009  

David S. Schwartz

University of Wisconsin Law School

Date Written: 1997

Abstract

There is strong reason to believe that arbitration, when imposed on employees and consumers by regulated corporate defendants, results in systematic underenforcement of employee and consumer protection laws. The article explores in depth both the procedural disadvantages compelled arbitration places on consumers and employees attempting to enforce their rights, and the history of the FAA and the largely judge-made "national policy favoring arbitration." Despite arbitration's surface appearance of neutrality, the subtle procedural disadvantages of arbitration for employees and consumers suppress the enforcement of consumer and employee protective statutes compared to the level of enforcement in cases litigated in court. Moreover, because terms of dispute resolution are never salient features of employee or consumer contracts " they are secondary details of the contract, often buried in small print " employees and consumers are likely to systematically undervalue their hypothetical future disputing rights, making it unlikely that the market will correct the windfall to defendants. Because regulated corporate defendants can count on courts to enforce pre-dispute arbitration agreements, the pro-arbitration judicial policy offers corporate defendants an opportunity to deregulate themselves. The article concludes by arguing that courts should deny enforcement of pre-dispute arbitration agreements, just as they would any other contract terms purporting to force protected parties to waive their rights in advance.

Keywords: employee, consumer, arbitration, compelled arbitration, Federal Arbitration Act FAA

JEL Classification: K40

Suggested Citation

Schwartz, David S., Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration (1997). Wisconsin Law Review, Vol. 1, p. 33, 1997; Univ. of Wisconsin Legal Studies Research Paper Archival Collection . Available at SSRN: https://ssrn.com/abstract=1499953

David S. Schwartz (Contact Author)

University of Wisconsin Law School ( email )

975 Bascom Mall
Madison, WI 53706
United States

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