Forced Arbitration - How Fine Print Clauses Are Threatening Nursing Home Residents Nationwide

In a recent three-part series, the New York Times explored the rise of forced arbitration, a practice that has quietly begun to threaten the legal rights of consumers, employees and patients, including nursing home residents, nationwide.

According to the paper, thousands of U.S. businesses have used arbitration to create “an alternate system of justice” over the course of the past decade. Within that system, businesses benefit and individual citizens suffer, with judges and juries replaced by arbitrators who “commonly consider the companies their clients.”

This change in the legal landscape has meant that “tens of millions of Americans have lost a fundamental right: their day in court.”

Arbitration agreements, according to the Times, can be found, (or, most likely, “buried”) in the fine print of tens of millions of contracts. The clauses ask the parties involved – a new employee and their employer, for example – to agree before they begin their relationship that they will settle any disputes they may have with each other out of court.

The consequence of signing such an agreement? Even if the employee experiences clear discrimination or harassment, or is otherwise harmed in the course of their employment, they are barred from the traditional means of legal recourse, including suing in civil court or joining a class action suit. Instead, their only choice is to address the issue in a private arbitration hearing, with the outcome decided by an arbitrator who probably has a financial incentive to rule in the company’s favor.

As NPR exposed in their own feature in October, forced arbitration is especially problematic for nursing home residents and their loved ones, who may unknowingly sign an arbitration clause – inserted somewhere within a tall stack of the facility’s intake forms – that robs the resident of their right to a jury trial if they become a victim of neglect.

In a paper directed to the Centers for Medicare and Medicaid Services (CMS), the Fair Arbitration Now Coalition summarizes why arbitration agreements are particularly harmful to nursing home residents:

During an admission process into a nursing home, which often takes place under stressful conditions, including following a recent hospital stay or a medical emergency, residents and their family members are presented with nonnegotiable admission documents to complete and sign. Many facilities’ admission contracts, which can be as long as 70 pages, contain forced arbitration clauses that require residents to surrender their right to bring legal claims against the facilities in court.

The paper, which calls on CMS to ban the use of arbitration agreements in the admission contracts, goes on to outline the dubious process of arbitration hearings, describing how the nursing home corporation selects the arbitrator and the rules for the arbitration, which then occurs out of the public eye and concludes in a decision that is rarely appealable.

Even when a ruling is decided fairly, the resident’s family can be sacked with financially crippling arbitrator and expert witness fees. The NPR piece includes the story of a woman who, after paying out three arbitrators and several experts, was left with less than $20,000 to compensate for the untimely and needless loss of her husband, who died after becoming dehydrated in a nursing home’s care. Other wronged individuals who go to arbitration, as the New York Times found, have been forced to declare bankruptcy due to the costs of the proceedings.

Understandably, the financial burden of arbitration deters many families of sick or injured residents from taking their case to a hearing, further enabling nursing home companies to neglect elderly residents with no legal or financial repercussions.

But whether the victims’ loved ones choose to drop their case or decide to follow through with the arbitration process, the results are the same: far too many Americans are denied justice due to fine print agreements that few are aware of. Meanwhile, nursing home management corporations and other large businesses are able to get away with everything from neglect, to sexual harassment, to fraud – all with no penalty.

As attorneys who represent nursing home residents who have experienced neglect, as well as their families, we know how important it is that victims of neglect have access to fair methods of legal recourse – and not only for the individuals involved in the case.

In a system where nursing home companies risk losing money in individual lawsuits or class actions, company leaders have a powerful incentive to create safe environments for residents. By standing up for residents and securing the compensation they are owed, our firm and other attorneys hold nursing homes accountable, compelling facilities to treat their residents appropriately and to follow the law – or else pay.

But if cases are guaranteed to go to arbitration, on the other hand, and companies can expect to provide a fraction, if anything, of what they would pay in a court setting or settlement, even if they commit wrongdoing, corporate executives are much less inclined to address harmful practices. In other words, binding arbitration doesn’t just deny victims their right to meet wrongdoers in court – it eases the path to future wrongdoing.

Thankfully, there are attorneys, lawmakers and nonprofit organizations all over the country fighting to end forced arbitration. As NPR points out, the federal government is considering a plan now that would regulate how nursing homes present arbitration agreements to new residents. In the paper cited earlier, the Fair Arbitration Now Coalition is challenging lawmakers to take their actions a step further by completely banning pre-dispute arbitration agreements in nursing home admission contracts.

Meanwhile, lawyers around the country are crafting creative arguments to ensure that their clients get their day in court, even if they signed arbitration clauses. Some have examined power of attorney documents to determine if they explicitly state that the nursing home resident’s acting agent (the person authorized to act on their behalf) is able to waive their fundamental rights, such as jury trials, by signing a pre-dispute agreement. If the document does not specifically mention that the agent, who would have signed the admission papers, has that ability, attorneys can argue that the agreement was invalid in the first place, and that their client has a right to a traditional trial.

This is all good news. Hopefully, as public awareness grows – with the help of more excellent media coverage – lawmakers will ultimately be forced to address binding arbitration across the board, including in the health care industry.

Until then, you probably don’t want to skip the fine print.

If you suspect that a loved one has been neglected in a nursing home’s care, whether or not you signed an arbitration agreement before they were admitted, please give us a call or fill out our contact form for a free consultation. Our award-winning attorneys have significant experience fighting on behalf of residents who have been injured or whose conditions have worsened in a nursing home’s care, as well as families who have lost loved ones due to nursing home neglect. Because we operate on contingency fees, you will not be charged unless we win your case.