Arbitration

The Boston Globe has really been pushing stories like this:

Under current law, arbitrators must consider what a municipality can afford. Walsh’s bill includes that same provision, but his campaign could not identify any new fiscal safeguards in his legislation.

The campaign maintained that the threat of binding arbitration could force compromise. But the campaign could not explain how the shift would better ensure that a community could pay for an arbitration award. Under Walsh’s proposal, an arbitrator’s ruling would be final, and the city council would have no say.

“That’s a major difference from current law,” said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a budget watchdog funded by businesses and nonprofits.

“Taking the city council out of the equation gives much more power to the arbitrator. It’s really a step backward for financial accountability to the taxpayer. It would seriously weaken the city’s hand.”

The idea is that binding arbitration is bad because it weakens the hand of the city, of course that means that the current system gives the advantage to cities but I guess that’s ok. In any case this is a complex situation–to decide which side we favor we would need to know how objective the arbitrators have been in the past (do they tend to favor one side) and the nuances of what happens when one side strongly objects to the decision.

What makes this interesting is that the Globe has not said much about binding arbitration that is much more common and definitely slanted to one side:

Stephanie Mencimer, noticed when she went to buy a car that there was a clause saying that she couldn’t sue for any reason, but would have to go through mandatory binding arbitration for any problems. This doesn’t sound too bad, but since the businesses hire the arbitrators there’s a built in conflict of interest. Here are a few bits:

Public Citizen found that in 94 percent of 19,000 cases, NAF arbitrators ruled in favor of the businesses that hired them. One arbitrator handled 68 cases in a single day, awarding every penny that the big companies were seeking. In one case Public Citizen looked at, the NAF also charged $1500 for a three-page document explaining the arbitrator’s decision, something unheard of in regular courts.

One reason businesses often come out on top in arbitration is that arbitrators who rule for consumers have a tendency to find themselves out of work. Such was the case with Richard Neely, a former chief justice of West Virginia’s Supreme Court, who worked briefly as an arbitrator for the NAF. In an article called “Arbitration and the Godless Bloodsuckers,” Neely reported that he had refused to award a bank arbitration-related fees that he judged to be far in excess of what a court would have charged. He never got another case. Neely is not alone. A 2000 study of forced arbitration in HMO contracts found that on the rare occasion that an arbitrator made a significant award for a patient, the HMO never hired that person to arbitrate a case again.

There have been bills to try to get this changed, but the Globe hasn’t been writing a bunch of editorials for those (though they do publish an occasional article). This has been amplified fairly recently:

The issue of arbitration fairness is front and center after a Supreme Court decision in April 2011, which allowed companies to use forced arbitration clauses to ban class actions against them.  Senator Franken recognizes the fundamental unfairness of the court decision, remarking that the decision “essentially insulates companies from liability when they defraud a large number of customers of a relatively small amount of money.”

I wonder why the Globe cares about one situation and not the other–it couldn’t be that the Globe cares more about corporations than unions could it?

About these ads

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 129 other followers

%d bloggers like this: