Forced Arbitration: What You Need To Know

Forced Arbitration

Forced arbitration is a hot topic in recent years. On a national level, the bipartisan Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act went into effect on March 3, 2022. That law barred enforcement of mandatory arbitration clauses in employment contracts for claims involving sexual misconduct. This was a great step towards increasing transparency and removing the veil of secrecy that arbitration provides to bad actors.

Before the federal government took action to limit forced arbitration, other states have prohibited forced arbitration in employment settings. For instance, California prohibits mandatory employee arbitration agreements entered into on or after January 1, 2020 for violations of the California Fair Employment and Housing Act (FEHA) and the California Labor Code, with limited exceptions. On September 15, 2021, the Ninth Circuit Court of Appeals upheld the enforceability of this California law that strengthened protections for workers.

Colorado Court of Appeals

Outside of the workplace, forced arbitration frequently arises in nursing home contracts. The Colorado Court of Appeals issued an opinion recently, Fresquez v. Trinidad Inn, 2022COA96, that addressed forced arbitration for a nursing home resident. In Fresquez, the question was whether arbitration agreements in health care settings are enforceable when they are contained in the required admission paperwork for a patient, and an agent signs that paperwork. And as is typical in law, the answer is, “it depends.”

An agent’s actual authority to make health care decisions for a patient and to sign the documents necessary to admit the patient to a health care facility does not encompass the authority to bind the patient to an arbitration agreement, unless the patient has granted the agent an unlimited power of attorney or otherwise clearly granted the agent the specific authority to bind the patient to an arbitration agreement.

To avoid forced arbitration, Colorado practitioners should carefully scrutinize the scope of an agent’s authority when assessing whether that agent is empowered to bind a patient to a healthcare arbitration agreement.