Jay (John) Fort

Associate Editor 

Loyola University Chicago School of Law, JD 2026

Today, the rapid proliferation of Mandatory Arbitration Agreements (MAAs) in modern U.S. commercial and employment transactions represents a clear and concerning trend: a pervasive and increasingly normalized paradigm shift in which big business exercises an unreasonable amount of legal control over consumers and employees alike. Important high profile examples – such as Disney, Kellog’s, and General Mills – spotlight how seamlessly such contractual clauses are used to preempt the rights of consumers and workers. Ultimately, these clauses effectively ban workers and consumers from bringing otherwise legally sound claims to the courtroom. The increasingly ubiquitous use of MAA’s represents a threat to basic principles of justice and fairness, exacerbating an already corporate friendly regulatory dynamic and commercial legal environment. However, this present reality is not predestined. Legislative proposals like the FAIR Act represent important balancing opportunities for federal regulators to empower consumers and workers by protecting them from unknowingly signing away their legal rights, and potential remedies, often with one simple click.

What is mandatory arbitration?

The arbitration process is understood as proceedings governed by parties who agree to resolve disputes with a neutral third party, one whose decision at the close of the dispute is final and legally binding. The primary federal law governing arbitration is the Federal Arbitration Act (FAA) of 1925, which establishes the binding nature of arbitration agreements, ensuring their validity, irrevocability, and enforceability in federal and state courts.

The Supreme Court has historically limited states’ attempts to provide further protection for consumers and workers, resulting in numerous rulings which heavily favor corporate entities. Additionally, the FAA has regularly been interpreted as highly deferential to corporations, in most instances. Data from the Economic Policy Institute suggests that the outcomes of mandatory arbitration agreements–  when compared to traditional courtroom litigation  –  tend to strongly favor corporations over both employees and consumers. As a result of this trend in court decisions, access to the courts has been effectively barred for more than 60 million Americans workers. This imbalance presents a critical impediment to fair and reasonably balanced regulatory action and practice.

Modern MAA examples

Two clear examples can be found in the modern practices of the Fortune 500 and Fortune 100 companies. The vast majority of these corporations utilize such compulsory clauses in countless consumer transactions on a daily basis. Recent high profile disputes between prominent global brands include Disney, General Mills’, and Kellog’s. These powerful international corporations use of MAA clauses have begun to receive increased legal scrutiny and public pushback from consumers, employees, and regulators alike.

Federal and state regulation of forced arbitration agreements

Positive movement has recently been made on the state and federal regulatory level. In the past decade, various federal agencies have established helpful rules and regulations, while state legislatures have passed innovative legislation designed to address modern issues. For instance, the Consumer Financial Protection Bureau (CFPB) proposed a rule blocking companies from utilizing “unreasonable” arbitration clauses, which impede consumer rights and legal remedies, such as the ability to bring suits, as well as prohibiting contract terms limiting free expression, threats of account closure, fines, or breach of contract claims.

 A few examples include preemption and class action waivers. The FTC retains and exercises the authority to prevent such agreements which interfere with consumer rights, allowing enforcement against business entities who violate consumer protection law. Additionally, former FTC Chair Lina Khan’s proposed rule banning non-compete agreements, represent a worthy effort by government to tip the scales more favorably towards consumers and workers.

Additionally, states such as Illinois, California, and New York have taken steps to better regulate the use of such clauses in commercial and employment contexts. While this steady progress is encouraging, it is ultimately up to the government to better inform, empower and protect the rights of its citizens by developing modern regulatory tools for modern times. As such, the pervasive use of MAAs and similar commercial contract clauses should be thoroughly regulated, ensuring both reliability and basic fairness to all parties.

The FAIR Act and protection of consumers and workers

Federal legislation, such as the Forced Arbitration Injustice Repeal (FAIR) Act, offers an important opportunity in the ‘tug-of-war’ between consumer and worker rights and corporate power. If enacted, the act would represent a reasonable- and necessary- shift within a broadly corporate friendly regulatory environment. If adopted, the FAIR Act would make several important changes. First, it would ban pre-dispute, mandatory arbitration agreements as invalid and unenforceable, preventing forced arbitration of employee, consumer, antitrust, or civil rights claims against corporations. Secondly, it would ensure that any dispute regarding the applicability of the FAIR Act to arbitration agreements must be decided by a court, regardless of the terms of agreement.

For most people in today’s commercial and employment environments, the boiler plate format and ubiquitous contractual language of MAAs is often unreasonably difficult to understand. Too often, it is a constant struggle to fully understand and evaluate the costs of such agreements, contracts in which so many preemptively- and unwittingly- sign away their rights, as consumers and workers, often without so much as a second thought.

Ultimately, there are tangible solutions that would help to level the commercial playing field. It is crucial that consumers and workers remain vigilant by increasing their understanding of the content and scope of such agreements, as well as the available alternatives. First, corporations should minimize the often ubiquitous usage of MAAs or, at the very least, be more transparent regarding the scope of such clauses and the impact of signing them. Second, regulators should rise to the modern occasion, adapting and maintaining a reasonable system which prioritizes fairness, balance, and protects just separation of transactional power.

Federal agencies and legislators, as well as state governments, must work in concert to provide a clear, consistent, fair and reliable regulatory framework and system. If adopted, the FAIR Act could serve as the cornerstone in a foundational bargaining system that treats consumers, workers, and corporations as equal parties in the modern transactional economy.