Arbitration clauses are common in nursing home and assisted living facility admission agreements.  While these clauses are touted by many as benefiting the parties by reducing the costs of litigation, shortening the time for resolving a dispute, and for allowing matters to remain private, the benefits are primarily for the nursing home or assisted living facility.  For residents, arbitration clauses often make bringing a claim against a facility prohibitively expensive, eliminate the right to have any dispute reviewed by a court, and eliminate a resident’s right to have a clearly erroneous arbitration decision reviewed and corrected by a court.  However, the most harmful aspect of these clauses is how they help facilities hide maltreatment (abuse, neglect, & exploitation) of elders.

What Are Arbitration Clauses?

It is a clause in the admission contract that requires the nursing home or assisted living facility and a resident to resolve any dispute arising from the contract (and the individual’s stay at the facility) through the arbitration process.  Arbitration is a private system in which disputes between parties are decided by a neutral third party known as an arbitrator. There is no jury. There is no judge. The arbitrator(s) listens to each party present their case. The arbitrator makes a decision and issues an arbitration award for the winning party. The parties agree, in advance through arbitration clauses, they will follow the arbitrator’s award so it is rarely, if ever, reviewed by a court. Even if there are obvious errors in the arbitration decision or award, they generally cannot be reviewed by a court.  The rules of arbitration are often less formal than a trial before a judge and jury. Unlike court proceedings, which are often a matter of public record, arbitration is private.

Ways Arbitration Clauses Help Facilities Hide Elder Abuse

When residents are required to sign arbitration clauses in admission agreements as a condition of admission, many residents have no time to review the contract they are signing, ask for information about what they are signing, or even read it.  Most often these contracts are being signed in crisis.  When residents sign these clauses, they are helping the facility hide any harm that may come to them at the hands of a facility or its staff.

  1. Arbitration eliminates a public record of claims of abuse, neglect and exploitation.  An arbitration clause requires that any claim against a facility for abuse, neglect or even exploitation must be made through the arbitration process.  When lawsuits are filed against a facility, there is a public record of the complaint and resolution.  Forcing all claims to be made and resolved through arbitration allows a facility to prevent any public record of previous claims against it.  This makes it harder for individuals to determine if the facility has a history of similar maltreatment, a pattern of abuse, and find other victims of facility abuse.  While arbitration clauses may not prohibit a resident from reporting a facility to a regulatory agency, often state regulatory agency records are not available to the public. Most disputes with facilities are not reported to regulatory agencies because of the nature of the dispute.  In many cases, state regulatory agencies are understaffed and underfunded so complaints are not rigorously investigated and facilities are not sanctioned for repeated bad conduct.  Consistent use of arbitration clauses across a nursing home or assisted living facility or its parent companies, makes it easier for a company to provide substandard or even abusive care company wide without consequences.
  2. Arbitration can be prohibitively expensive for facility residents.  While proponents of arbitration clauses tout arbitration as being “cheaper” than litigation.  This is often only true at the beginning.  In most arbitration proceedings, there are fees at every stage of the process.  If a party wants an evidentiary hearing, the parties must shoulder additional costs of the arbitrator or arbitration panel for the hours or days of the evidentiary hearing.  These fees do not include the parties’ attorneys’ fees, costs for discovery, or fees paid for experts.  Most arbitration clauses mandate that these costs are shared between the parties. If the arbitration fees are not paid, the arbitration process is halted until the fees are paid.  In court proceedings, there are filing fees and fees for serving a defendant with the lawsuit.  There are also attorneys’ fees, costs for discovery, and fees paid to experts, just as there are in an arbitration proceeding.  However, there is not a fee associated with each filing or hearing, as can be the case in arbitration.  In some cases, courts can waive filing fees for individuals who are indigent.  Many facility residents are indigent. Unlike arbitration, in court cases, costs can be recovered against a defendant who loses.  In arbitration, the costs are shared by both parties, even if a party wins.  A resident may win an award, but that award can be consumed by costs.  Because of the prohibitively high costs of arbitration, harmed residents may be unable to file or continue to pursue a claim against a facility that has abused them.
  3. Arbitration eliminates class action lawsuits that could change bad behavior.  Arbitration clauses usually require residents to waive both their right to a trial in court and filing or participating in a class action lawsuit. Because arbitration keeps claims private, often bad behavior continues without punishment or a class action lawsuit that forces change in behavior. Even if a pattern is discovered, all the potentially aggrieved parties are bound by their arbitration agreements. Each aggrieved party must submit their individual claims to arbitration instead of banding together into a class to file a suit.
  4. Arbitration awards are often smaller reducing the consequences to abusive facilities. Damage awards are meant to make a victim whole.  Studies have shown that arbitration awards are smaller than damages awarded through a trial.  With a smaller award and higher costs, residents are unlikely to recover the damages they might have suffered or be entitled to under state or federal law in a court proceeding.  With smaller awards against facilities who harm elders, these facilities have less incentive to change behavior.

Federal Regulation of Arbitration Clauses In Nursing Home Contracts

During President Obama’s administration the federal government developed rules prohibiting nursing homes from requiring residents to sign pre-dispute arbitration clauses as a condition of admission.  42 C.F.R. 483.70(n)(2)(ii).  However, the Trump administration has proposed new rules to roll back these protections.  Under the new administration’s rules, nursing homes could require residents to sign binding arbitration clauses as a condition of admission.  Advocates for the elderly and disabled submitted hundreds of comments in opposition to these rule changes.  These advocates cite the harm caused by these agreements when they are signed by vulnerable adults, in a time of crisis, before life saving and life sustaining care will be provided.

State Regulation of Arbitration Clauses in Nursing Home Contracts

States vary in their approaches to the use of arbitration clauses in nursing home and assisted living facility admission agreements.  However, many of those regulations are preempted by federal law.  The Federal Arbitration Act (FAA) states that arbitration clauses are valid, except for such grounds as exist under the law or in equity for revocation of any contract.  If state laws restrict arbitration clauses in a way that conflicts with FAA, federal law and FAA is binding.  Kindred Nursing Centers v. Clark, 518 U.S. ___ (2017).  When residents challenge binding arbitration clauses, they can now use only those reasons  available under state or federal law to invalidate a contract.  These can include: lack of mental capacity, lack of legal authority, undue influence, fraud in the inducement, and others depending on the state.

How to Protect Against the Damage of Arbitration Clauses

If you are being asked to sign a contract that contains an arbitration clause for yourself or someone else, be sure to do the following:

  1. READ THE ENTIRE CONTRACT BEFORE YOU SIGN IT!  You cannot be forced to sign a contract before you have thoroughly reviewed it.  If a facility asks you to do so, contact your state regulators or an attorney.
  2. If you are signing on behalf of someone else, understand what legal authority you may or may not have to sign the contract.  Often Durable Powers of Attorney prohibit an agent from waiving jury trials or signing pre-dispute arbitration clauses.  In most states, an individual with authority only to make health care decisions is not authorized to sign arbitration clauses.  And, simply because someone is a spouse or child of a residents does not give them the authority to sign these agreements.
  3. Ask an elder law attorney to review the contract and provide advise.
  4. Strike out or cross out the arbitration clause, if you do not have the authority to sign it or are unwilling to agree to it.