Arbitration Agreement: What is It?
Arbitration agreements are contracts between two or more parties that require them to resolve a dispute outside of court. They are most commonly used in medical malpractice cases, personal injury cases, and nursing homes.
Essentially the nursing home asks you to agree to settle any potential disputes that you might have against the facility outside of court system. In fact, many nursing homes go further and require the parties to submit to binding arbitration, meaning you can’t once again go to court to resolve your dispute with the nursing home, rather you must follow the process set forth in the arbitration agreement.
These agreements spell out the process where the dispute is ultimately settled by a neutral third party, referred to as an arbitrator. It is important to note that the arbitrator is not a judge and does not have the authority of the court. The process is also set up to be more informal, without the rigid outlines of a court proceeding, so the parties involved have more flexibility in terms of how to present their case. The process is also cost friendly, as there are no costly expert witness fees and minimal fees for the room rental etc.
In a typical agreement, arbitration follows a process very similar to a court lawsuit. A claimant who believes they have a case against a nursing home first must file a "Notice of Claim" which specifies the nature of the claim and what the claimant seeks. The process itself can include both written discovery, where each party to the arbitration request documentation from the other side and oral depositions, where the parties to the arbitration answer questions under oath , just like a lawsuit.
Arbitration is usually preferred over court because it is much less expensive and faster of a process. Signing an arbitration agreement only binds the parties to the arbitration but does not mean that there will ever be an arbitration hearing. Only if a person wants to and has a claim against the nursing home will the arbitration come into play.
Another reason that nursing homes prefer these agreements is that they also allow both parties (but mostly sided in favor of the facility) to select the arbitrator. They do this by asking the claimant to pair with them and mutually select the arbitrator. When the ABI researcher asked nursing homes on who typically selects the arbitrator, 73% of facilities said the resident and the facility did, "equally" or "mixed." Most nursing homes are going to choose a retired judge or a lawyer who is known to favor the nursing home as opposed to a party with a more well-rounded record.
Once the parties agree on the arbitrator, the parties can then go about selecting the "rules" that will apply to the arbitration, allowing the parties to determine for themselves the type of arbitration procedure they want to follow.
The short answer is no, state and federal Civil Rights laws will still apply here in Illinois and the United States even if you sign an arbitration agreement with a nursing home. Thus a male resident who was discriminated against based on age, race, or sex would still have the right to sue the nursing home for violations of the Civil Rights laws. But they may be required to go through the arbitration first.
Why Arbitration Agreements Matter in Nursing Homes
Some facilities will try to convince you that having an arbitration agreement is to your benefit. They are incorrect, however, there are a few limited instances where this may be true but it is not particularly beneficial for the resident. In most cases, the benefit of these agreements is solely to the facility. To put it mildly, the first time you hear "binding arbitration" is when you are handed a stack of papers and told to sign. Alternatively, these agreements will be inserted into all the mountains of paperwork for the resident to sign, and the resident will be told to sign everything that needs to be signed. This takes place regardless of whether the resident or family member wants to sign or even understands what they are signing. The nursing home employee will use phrases such as "just a formality" or "just to keep us out of the courts" to minimize the impact of the agreement. All of this, of course, occurs while the forms are being circulated and signed with no advice or counsel from an attorney. Facilities do this for good reason, they do not want the residents or their families to really understand this agreement before it is signed. This tactic alone is an indication that the facility does not have a good understanding about the implications of arbitration agreements either. As a result, many facilities do not bother to make the terms clear to the residents. Arbitration agreements have been used in the past to limit the right of residents to access the courts should they wish to challenge the nursing home or their employees. Arbitrators also tend to consider the nursing home more favorably than the residents. Arbitrators have a tendency to be very conservative in their rulings and will often allow nursing homes to keep and enforce these agreements even when they were signed under questionable circumstances. Some states have begun passing laws which attempt to limit the use of arbitration agreements in the nursing home setting, but these efforts mainly help nursing homes which have already adopted these agreements.
Arbitration Agreements Impact On Residents
When a resident signs an arbitration agreement, it typically represents a waiver of his or her right to sue the nursing home in court instead agreeing to have their claims heard by an arbitrator. Arbitration is a legal process to resolve a dispute between two parties that is conducted by a neutral third party. Instead of having a judge or jury decide on the outcome of the claim brought by a party, the arbitrator will review the evidence and make a decision on their dispute.
The neutral third party selected for the arbitration is often someone affiliated with the American Health Care Association (AHCA). The AHCA is the national organization representing over 13,500 for-profit nursing facilities and assisted living centers. The AHCA also has a "forced arbitration" model agreement, which they refer to as a Dispute Resolution Agreement. Moreover, the AHCA’s Legal Regulatory Services Group provides free legal support to AHCA and its members. Therefore, it is important to understand how the arbitration process is affected by the fact that the AHCA members streamlined, facilitated, and in some cases, drafted the process. Furthermore, the individual deciding the fate of the nursing home resident’s claim may itself be the AHCA’s preferred arbitration vendor. It is unclear whether the AHCA has a vested interest in seeing nursing homes treated equitably (or if their preferential arbitration system is prioritizing their members).
Whether the arbiter is actually unbiased ended up being a moot point in signatory contracts, as residents who signed arbitration agreements were not given the benefit of having a decision rendered by a judge or jury. Instead of using the standard preponderance of the evidence legal threshold, victims in these agreements are subjected to a "clear and convincing evidence" threshold; a much more difficult standard to meet. Experts have different views on the impact this lower threshold has on an individual. A recent analysis determined "the bar is a wee bit lower." Yet, arbitrators appear to believe the lower standard in the contracts is not meaningful enough to persuade them to render a completely different decision. However, if plaintiffs are seeking any sort of appeal to a decision made by an arbitrator, they are out of luck. Parties who opted for arbitration had to waive their right to file a lawsuit or seek class action relief. Furthermore, they gave up their right to obtain a jury trial. Final decisions rendered can only be reviewed by a court on a very limited basis. The basis for a court’s review is based on the following: The threshold for the court’s review is incredibly high, as "evidence" to meet any of these standards requires "clear and convincing evidence" that clearly establishes the process was unfair. If the party seeking to appeal the arbitrator’s decision does not give the court enough evidence to provide clear proof of a pre-determined agenda from the arbitrator’s decision, then the arbitrator’s decision will stand with no possibility of challenging the finding in the future. One question that has yet to be answered is what happens when there is a dispute between the parties about the outcome of the arbitration or whether the outcome is in line with the agreed upon arbitration contract. Furthermore, if the parties to the arbitration agree to the arbitration vendor, who handles the challenges to the vendor or their alleged bias towards one of the parties?
Legal Issues And Enrollment Processes
Arbitration agreements are subject to a variety of legal requirements. For instance, they can only be used to resolve claims that arise out of or relate to the agreement. They can’t cover claims concerning abuse or neglect relating to the care of a resident. In addition, if an agreement is used, the facility must give each current resident (or the current resident’s legal representative) a copy of the arbitration agreement within 30 days of the arbitration agreement’s execution. An arbitration agreement can’t be part of the admission contract. It may, however, accompany a separate voluntary arbitration agreement.
It is also key to understand the enrollment process. For instance, the Centers for Medicare and Medicaid Services has identified four compliance requirements for arbitration agreements. First, the arbitration agreement must NOT be a condition of admission. Second, the arbitration agreement must either be an addendum to the admission agreement or must be a separate document that is signed by the individual authorized to legally act on behalf of the resident. Third, the arbitration agreement should permit either party, upon written notice to the other, to reject the agreement for any reason, or no reason. Fourth, the arbitration agreement must specify that a resident has the right to have an attorney present during discussions regarding the use of an arbitration agreement in the care of the resident. This could include the initial admission process, periodic re-certifications, and regular reviews of the use of arbitration agreements.
Further, if an agreement is utilized, the facility must provide each current resident (or the current resident’s legal representative) with a copy of the arbitration agreement within 30 days of the arbitration agreement’s execution.
Benefits and Disadvantages of Signing Arbitration Agreements
Each side of the coin presents its own story. Arbitration agreements are no different. Regarding the positive, an arbitration agreement does offer some great benefits to the resident and the family. An arbitration agreement takes the case out of the court system and in to an arbitration venue. This venue is supposed to be more efficient than the civil court system. As an alternate private dispute resolution mechanism, the judge in this private arbitration will go fast, more streamlined, and arguably more efficient. That is great for a family. It does not tie them up in court for 2-3 years. As a father, husband, grandmother, or even a son; time is extremely valuable. Additionally , the agreements typically provide for confidentiality. The parties’ business is not open to the public. It will not make the national news. It will not be plastered on everyone’s social media account. The facility is protected from public harm and reputation damage. Quite the opposite is true. The process in court is public record. Our entire civil court system is open to the public as a part of access to justice. Just walking in to the courthouse a day will show you the number of public trials that take place. Public venues also cost money and time. The amount of court fees, deposition expenses and hours add up quickly while in the public arena. Finally, awards in an arbitration are capped by the agreements. In personal injury cases, this can limit the resident from receiving a full recovery for their injuries. In the end, it is your choice, as the resident and family, to decide what is best for you and the family.
How To Fight Arbitration Agreements
A nursing home arbitration agreement may be challenged as unenforceable on many grounds, including that the nursing home failed to comply with the notice requirements in the statute, that the party to be bound had a diminished capacity, that the arbitration agreement was a contract of adhesion, or that the nursing home fraudulently induced the party to enter into the arbitration agreement.
In an effort to ensure that these contracts are entered into knowingly and voluntarily, the Illinois Nursing Home Care Act ("Act") sets out a specific procedure with which all nursing homes must comply. If this procedure is not followed, the arbitration agreement could potentially be found unenforceable.
Under the act, nursing homes are required to provide a clear and conspicuous disclosure, in writing, to the person signing the agreement about the obligation to resolve disputes through arbitration. The act requires that two paragraphs be included before the arbitration agreement appears, explaining "(1) the rights of the parties, including the right to trial by jury and the right to appeal a court judgment under the Code of Civil Procedure and (2) that the parties are giving up their rights to a jury trial and a court appeal." 210 ILCS 45/2-2604.
The failure to comply with this special statutory notice requirement makes the arbitration agreement, as well as any other contract signed at that time, unenforceable. In Murdock, the decedent’s family was informed that their mother needed physical therapy but not that her Medicaid was running out at the end of the month. When the family was informed of this fact, it "informed the nursing home that it would be transferring her to a different nursing facility and that an agreement should not be signed." Nonetheless, the nursing home told the family to sign that same day because they needed another bed, assuring them "that no one would hold it against them for transferring her." 2012 IL 112362, ¶ 9. The family signed the nursing home admission agreement, including the arbitration agreement, without reading the sections required by the statute.
After the decedent died, her estate brought a wrongful death action against the nursing home and its employees for negligence and negligent hiring, claiming that the nursing home’s negligence caused the decedent’s death. Relying on the arbitration agreement, the nursing home moved to compel arbitration. 2012 IL 112362, ¶ 11. The Circuit Court denied the motion and the appellate court affirmed. 2012 IL App (3d) 110303. On appeal, the Illinois Supreme Court disagreed. In reversing the decisions of the lower courts, the court noted that "the notice requirement appears in a section of the Act captioned ‘Entry of Agreement’ and can only be avoided if ‘, in writing, the resident specifically refuses to sign an admission agreement that contains a provision for binding arbitration…’" 2012 IL 112362, ¶ 17.
The court found the notice requirement "clear and unambiguous" and when "a statute imposes a clear duty upon a party that is for the benefit of another, it is reasonable to interpret the statute as creating an enforceable duty in favor of the party the statute was intended to protect." 2012 IL 112362, ¶ 18. Since the nursing home failed to comply with this provision, the court concluded that the admission agreement, including the arbitration agreement, was void. 2012 IL 112362, ¶ 20.
Recent Legal Trends and Arbitration Agreements
In response to the chain of nursing homes operated by Rebecca and Amiram Sopher in South Florida, the Office of the Attorney General requested and received an injunction from the 11th Judicial Circuit Court of Florida prohibiting Sopher and its operating entities from enforcing arbitration agreements. The court held that the arbitration agreements were unconscionable and that as a result of the business practices employed by the Sopher group, any agreement the managers at those facilities or nurses obtained the signature of a resident could not be fairly considered knowing and voluntary . Not much has been done at the federal level since the US Supreme Court ruling in 2015 which provided nursing homes the ability to compel residents to arbitrate any claims against them. Nursing homes that have successfully compelled arbitration have been able to keep claims out of the public eye; the cases are not available on CaseLook.