SERVICEMEMBER
RIGHTS
Mandatory Arbitration
Clauses Have
Affected Some
Employment and
Consumer Claims but
the Extent of Their
Effects is Unknown
Report to Congressional Committees
February 2021
GAO-21-221
United States Government Accountability Office
United States Government Accountability Office
Highlights of GAO-21-221, a report to
congressional committees
February 2021
SERVICEMEMBER RIGHTS
Mandatory Arbitration Clauses Have
Affected Some
Employment and Consumer Claims but the Extent of
Their Effects is Unknown
What GAO Found
Mandatory arbitration clauses in civilian employment contracts and consumer
agreements have prevented servicemembers from resolving certain claims in
court under two laws that offer protections: the Uniformed Services Employment
and Reemployment Rights Act of 1994, as amended (USERRA), and the
Servicemembers Civil Relief Act, as amended (SCRA) (see figure). Some courts
have held that claims involving mandatory arbitration clauses must be resolved
with arbitrators in private proceedings rather than in court. Although we reviewed
federal court cases that upheld the enforceability of these clauses, Department of
Justice (DOJ) officials said mandatory arbitration clauses have not prevented
DOJ from initiating lawsuits against employers and other businesses under
USERRA or SCRA. However, DOJ officials noted that these clauses could affect
their ability to pursue USERRA claims against private employers on behalf of
servicemembers. Servicemembers may also seek administrative assistance from
federal agencies, and mandatory arbitration clauses have not prevented
agencies from providing this assistance. For example, officials from DOJ, as well
as the Departments of Defense (DOD) and Labor (DOL), told us they can often
informally resolve claims for servicemembers by explaining servicemember rights
to employers and businesses.
Examples of Employment and Consumer Protections for Servicemembers
Note: USERRA generally provides protections for individuals who voluntarily or involuntarily leave civilian
employment to perform service in the uniformed services. SCRA generally provides protections for servicemembers
on active duty, including reservists and members of the National Guard and Coast Guard called to active duty.
Data needed to determine the prevalence of mandatory arbitration clauses and
their effect on the outcomes of servicemembers’ employment and consumer
claims under USERRA and SCRA are insufficient or do not exist. Officials from
DOD, DOL, and DOJ told us their data systems are not set up to track these
clauses. Further, no data exist for claims settled without litigation or abandoned
by servicemembers. Finally, data on arbitrations are limited because they are
often private proceedings that the parties involved agree to keep confidential.
View GAO-21-221. For more information,
contact
Kris T. Nguyen at (202) 512-7215 or
Why GAO Did This Study
Servicemembers are among millions of
Americans who enter
into contracts or
agreements with mandatory arbitration
clauses. For example, these provisions
may be in
cluded in the contracts
servicemembers sign when they enter
the civilian workforce, obtain a car
loan, or lease an apartment.
These
contracts
generally require disputes to
be resolved in private proceedings with
arbitrators rather than in court.
Due to concerns these clauses may
not afford servicemembers certain
employment and consumer rights,
Congress included a provision in the
National Defense Authoriz
ation Act for
Fiscal Year 2020 for GAO to study
their effects on servicemembers’ ability
to file claims under USERRA a
nd
SCRA. This report examines (1) the
effect mandatory arbitration has on
servicemembers’ ability to file claims
and obtain relief for vio
lations of
USERRA and SCRA, and (2) the
extent to which data are available to
determine the prevalence of mandatory
arbitration clauses and their effect on
servicemember claims.
GAO reviewed federal laws, court
cases, and regulations, as well as
agency do
cuments, academic and
industry research, and articles on the
claims process. GAO interviewed
officials from DOD, DOL, DOJ, and
other agencies, academic researchers,
and a range of stakeholders
representing servicemembers,
businesses, attorneys, and arbitra
tion
firms. GAO also identified and
evaluated potential sources of data on
servicemembers’ employment and
consumer claims collected by federal
agencies and the firms that administer
arbitrations or maintained in court
records.
Page i GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Letter 1
Background 2
Mandatory Arbitration Clauses Have Prevented Servicemembers
from Resolving Certain Employment and Consumer Claims in
Court 7
Data Needed to Determine the Prevalence of Mandatory
Arbitration Clauses and Their Effect on Outcomes of Claims
under USERRA and SCRA are Insufficient or Do Not Exist 14
Agency Comments and Our Evaluation 15
Appendix I Objectives, Scope, and Methodology 17
Appendix II Federal Administrative Process for Certain Employment and Consumer
Claims by Servicemembers 20
Appendix III GAO Contact and Staff Acknowledgements 24
Table
Table 1. Examples of Rights Provided under USERRA and SCRA
to Help Servicemembers Pursue Claims 7
Figures
Figure 1. Examples of Process for Resolving Civilian Employment
Claims under USERRA 21
Figure 2. Example of Process for Resolving Consumer Claims
under SCRA 22
Contents
Page ii GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Abbreviations
CFPB Consumer Financial Protection Bureau
DOD Department of Defense
DOJ Department of Justice
DOL Department of Labor
ESGR Employer Support of the Guard and Reserve
EEOC Equal Employment Opportunity Commission
FINRA Financial Industry Regulatory Authority
MSPB Merit System Protection Board
OSC Office of Special Counsel
SCRA Servicemembers Civil Relief Act, as amended
USERRA Uniformed Services Employment and Reemployment
Rights Act of 1994, as amended
VETS Veterans’ Employment and Training Service
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Page 1 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
441 G St. N.W.
Washington, DC 20548
February 26, 2021
The Honorable Jack Reed
Chairman
The Honorable James M. Inhofe
Ranking Member
Committee on Armed Services
United States Senate
The Honorable Adam Smith
Chairman
The Honorable Mike Rogers
Ranking Member
Committee on Armed Services
House of Representatives
Servicemembers are among the millions of Americans who enter into
contracts or agreements for consumer goods and services—such as car
loans or apartment leases—that contain mandatory arbitration clauses.
1
These contracts generally require disputes to be resolved in private
proceedings with arbitrators rather than in court. Due to concerns that
arbitration may not afford servicemembers certain employment and
consumer protections to which they are entitled, the National Defense
Authorization Act for Fiscal Year 2020 includes a provision for GAO to
study the effects of these clauses on servicemembers’ ability to file claims
seeking relief for violations of their employment and consumer protections
under the Uniformed Services Employment and Reemployment Rights
Act of 1994, as amended (USERRA), and the Servicemembers Civil
Relief Act, as amended (SCRA).
2
1
Throughout the report, unless otherwise specified, we use the term servicemembers to
refer to active-duty personnel as well as members of the Reserve Components of the
Armed Forces, which include the Army National Guard of the United States, Army
Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force
Reserve, and Coast Guard Reserve.
2
USERRA prohibits employment discrimination against a person on the basis of past
military service, current military obligations, or an intent to serve. See Pub. L. No. 103-
353, 108 Stat. 3149 (codified as amended at 38 U.S.C. §§ 4301-4335). SCRA provides
certain legal and financial protections such as allowing servicemembers to terminate
apartment leases when they enter military service or get deployed. See Pub. L. No. 108-
189, 117 Stat. 2835 (2003) (codified as amended at 50 U.S.C. §§ 3901-4043).
Letter
Page 2 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
This report examines: (1) the effect mandatory arbitration has on
servicemembers’ ability to file claims and obtain relief for violations of
USERRA and SCRA, and (2) the extent to which data are available to
determine the prevalence of mandatory arbitration clauses and their effect
on servicemember claims.
To examine the effect mandatory arbitration has on servicemembers’
ability to file claims and obtain relief for violations of USERRA and SCRA,
we reviewed relevant federal court cases, laws, and regulations, as well
as settlement information from the Department of Justice (DOJ) and other
agency documents. We also interviewed a range of stakeholders involved
in the claims processes for these laws, including agency officials, military
legal assistance attorneys, private attorneys involved in servicemembers’
cases, academic researchers, officers of firms that administer arbitrations,
and representatives of associations that advocate for the interests of
servicemembers, businesses, and attorneys. To examine the extent to
which data are available to determine the prevalence of mandatory
arbitration clauses and their effect on servicemember claims, we
evaluated potential sources of data on employment and consumer claims
under USERRA and SCRA that are collected by federal agencies and
firms that administer arbitrations, or maintained in court records. We
discussed these potential sources of data with agency officials and
officers of two arbitration administrators responsible for maintaining them,
and with representatives of associations that advocate for
servicemembers, businesses, and attorneys. For additional information
on the methodology used in this report, see appendix I.
We conducted this performance audit from May 2020 to February 2021 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Mandatory arbitration clauses may be included in contracts or
agreements that individuals sign when, for example, they accept a job,
take out a loan, or buy a car. These clauses generally require any
disputes between individuals—including servicemembers—and
employers or companies to be settled by a neutral third-party arbitrator,
Background
Mandatory Arbitration
Clauses
Page 3 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
rather than in court. These clauses may also specify the firm, or a choice
of firms, that will administer the arbitration.
Mandatory arbitration proceedings are often similar to court proceedings
but may entail some key differences. In mandatory arbitration, both
parties to a dispute present evidence to a third party to resolve the
dispute. However, arbitrators rather than judges oversee the proceedings
and make awards that are generally binding on the parties. Unlike most
court decisions, mandatory arbitration awards generally cannot be
appealed, although parties can seek orders from federal courts to vacate,
meaning to overturn, these awards under certain conditions.
3
Arbitration
proceedings are generally held in private. Arbitrators and firms that
administer arbitrations are often obligated to keep the information from
these proceedings confidential.
4
In addition, both parties to an arbitration
may agree to keep the proceedings and outcome confidential. However,
some arbitration administrators may be required to report general data
and information about the arbitrations they administer.
5
In addition, the
Financial Industry Regulatory Authority (FINRA), a self-regulatory
organization responsible for regulating securities firms doing business in
the United States that also administers arbitrations related to securities,
publishes information about arbitrations that result in awards.
6
This may
include an explanation of the rationale for the awards and the general
reasons for the arbitrators’ decision.
Studies by GAO and others indicate that mandatory arbitration clauses
are common in employment and consumer contracts and that, in some
cases, the use of these clauses has increased over time. For example,
3
See 9 U.S.C. § 10. For example, arbitration awards can be vacated where the arbitrators
were guilty of misconduct in refusing to postpone a hearing or hear evidence pertinent and
material to the dispute.
4
For example, the American Bar Association and American Arbitration Association Code
of Ethics for Arbitrators in Commercial Disputes states that arbitrators should keep
confidential all matters relating to the arbitration proceedings and decision.
5
For example, California state law requires certain private arbitration companies to
regularly publish and make available to the public certain information on consumer
arbitrations, including the amount of the claim, the prevailing party, and the amount of any
monetary award, among other things. See C
AL. CIV. PROC. CODE § 1281.96 (West 2020).
Officers of two arbitration administrators that each administered at least one thousand
employment and consumer arbitrations each year from 2015 through 2019 told us they
report data for all states and the District of Columbia.
6
FINRA’s Code of Arbitration Procedure for Customer Disputes states that FINRA will
make awards publicly available. See FINRA Rule 12904(h).
Page 4 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
we surveyed private-sector employers in 1995 and found that less than 5
percent mandated arbitration for their employees,
7
while a 2018 study
found more than half of employers surveyed had adopted mandatory
arbitration.
8
With respect to consumer contracts, the Consumer Financial
Protection Bureau (CFPB) reported in 2015 that tens of millions of
consumers use certain consumer financial products or services that are
subject to mandatory arbitration clauses.
9
Department of Defense (DOD) data indicate the active and Reserve
Components of the Armed Forces are composed primarily of enlisted
servicemembers whose base salary is $50,000 per year or less.
Specifically, more than half of active-duty enlisted servicemembers and
more than one third of enlisted reservists are age 25 or younger.
10
As of
October 2020, at least 88 percent of active-duty enlisted servicemembers,
87 percent of enlisted National Guard members, and 82 percent of
7
Specifically, 9.9 percent of the employers surveyed used arbitration and 39 percent of
those employers made arbitration mandatory for all covered employees. We calculated
estimates from the survey at the 95-percent confidence level with sampling errors of +- 3
and +-16 percentage points, respectively. See GAO, Employment Discrimination: Most
Private-Sector Employers Use Alternative Dispute Resolution, GAO/HEHS-95-150
(Washington, D.C.: July 5, 1995). We surveyed a nationally representative, random
sample of companies that reported having more than 100 employees in 1992.
8
Colvin, Alexander, J.S., The Growing Use of Mandatory Arbitration: Access to the Courts
is Now Barred for More than 60 Million American Workers, Economic Policy Institute
(Washington, D.C.: April 6, 2018).The author surveyed a sample of private-sector
employers drawn from a national marketing database of business establishments that
reported having 50 or more employees. With respect to non-union employees, 50.4
percent of respondents reported having employees sign a mandatory arbitration contract,
while an additional 3.5 percent of respondents reported mandating arbitration by
incorporating it in their employment policies. Due to the differences between GAO’s
survey and this survey, we cannot precisely measure how much the use of mandatory
arbitration clauses has expanded in employment contracts. However, the results generally
indicate that employers have expanded their use of mandatory arbitration.
9
CFPB, Arbitration Study: Report to Congress, pursuant to Dodd-Frank Wall Street
Reform and Consumer Protection Act § 1028(a) (March, 2015). For example, CPFB found
that: seven of the eight largest facilities-based mobile wireless providers, covering 99.9
percent of subscribers, used mandatory arbitration clauses in their 2014 customer
agreements; 15.8 percent of credit card issuers the Bureau studied, covering 53 percent
of credit card loans outstanding used mandatory arbitration clauses as of December 31,
2013; and just over 92 percent of prepaid cards the Bureau studied, representing at least
82.9 percent of the dollar value loaded onto such cards, included mandatory arbitration
clauses as of summer 2014.
10
U.S. Department of Defense, Office of the Deputy Assistant Secretary of Defense for
Military Community and Family Policy, 2018 Demographics: Profile of the Military
Community.
Servicemember
Characteristics
Page 5 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
enlisted reservists earned annual base salaries of about $50,000 or
less.
11
USERRA and SCRA provide certain protections to servicemembers in
many employment and consumer arrangements. USERRA, enacted in
1994, protects the employment and reemployment rights of individuals
who leave their employment to perform uniformed service.
Servicemembers may work for public or private employers when they are
not performing uniformed service for a number of reasons. For example,
members of the Reserve Components of the Armed Forces may leave
civilian employment if called to duty, and then reenter the civilian
workforce once their service has ended.
12
Similarly, active-duty personnel
may leave military service and enter the civilian workforce as veterans.
13
USERRA provides that servicemembers returning to civilian jobs must be
promptly reemployed in the same position that they would have attained
had they not been absent for military service, with the same seniority,
status, and pay.
14
Employers are also prohibited from denying initial
employment, reemployment, retention in employment, promotion, or any
benefit of employment to a person on the basis of a past, present, or
future military service.
15
USERRA protections extend to other benefits
included in employment contracts, such as retirement plans, health care
11
This range does not include basic allowances for housing, subsistence, and other forms
of compensation available to servicemembers.
12
The Reserve Components of the Armed Forces include the Army National Guard of the
United States, Army Reserve, Marine Corps Reserve, Air National Guard of the United
States, Air Force Reserve, and Coast Guard Reserve. Based on concerns about the
difficulties demobilized reservists face in dealing with reemployment issues, we raised a
matter for Congressional consideration and made six recommendations to DOD and the
Department of Labor (DOL) to address challenges with their oversight of reservists’ civilian
employment issues, all of which were implemented. See GAO, Military Personnel:
Additional Actions Needed to Improve Oversight of Reserve Employment Issues,
GAO-07-259 (Washington, D.C.: February 8, 2007).
13
Although USERRA also provides protections for veterans, this report focuses on
servicemembers.
14
See 38 U.S.C. §§ 4312-4316.
15
See 38 U.S.C. § 4311(a). USERRA prohibits employers from retaliating against a
person because of an action taken to enforce or exercise any USERRA right or for
assisting in a USERRA investigation. See 38 U.S.C. § 4311(b). Under USERRA, “service
in the uniformed services” is defined to mean the performance of duty on a voluntary or
involuntary basis in a uniformed service under competent authority and includes active
duty, active duty for training, initial active duty for training, inactive duty training, and full-
time National Guard duty, among other things. See 38 U.S.C. § 4303(13) & (16).
Servicemembers’
Employment and
Consumer Rights under
USERRA and SCRA
Page 6 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
and other insurance coverage, vacation days, and the ability to select
work hours or the location of employment.
16
SCRA, enacted in 2003, generally provides legal and financial protections
to servicemembers and eases financial burdens on them by providing,
among other things, protections related to rental agreements, security
deposits, evictions and foreclosures, credit card and mortgage interest
rates, automobile leases, and health and life insurance.
17
For example,
SCRA generally requires companies to obtain court orders before
repossessing cars from servicemembers while they are in military service,
or foreclosing on their homes during, or within one year after, their period
of military service.
18
SCRA also provides certain benefits and protections
to servicemembers’ dependents, including spouses and children. For
example, servicemembers who terminate apartment or car leases upon
entering military service also remove any obligation their dependents may
have under the lease.
19
USERRA and SCRA grant servicemembers a number of rights to help
them pursue their claims in court or through a federal administrative
process (see appendix II). For example, both laws provide
servicemembers a private right of action, meaning the ability to bring a
lawsuit in court (see table 1). Under both laws, servicemembers may not
be subject to certain statutes of limitations that would apply to other
individuals in similar situations. For example, there is generally no limit on
the period for filing a claim against an employer under USERRA. In
addition, if servicemembers claim rights under USERRA, the law prevents
them from being charged fees or court costs. And those who claim rights
16
See 38 U.S.C. §§ 4303(2) and 4316-4318. USERRA applies to public and private
employers in the United States, regardless of size, and includes federal, state, and local
governments, as well as for-profit and not-for-profit private sector firms.
17
SCRA provides protections to those in “military service,” defined as including full-time
active-duty members of the Army, Navy, Air Force, Marine Corps, and Coast Guard;
reservists on federal active duty; members of the National Guard on federal orders for a
period of more than 30 days; commissioned officers in active service of the Public Health
Service or the National Oceanic and Atmospheric Administration; and servicemembers
absent from active duty on account of sickness, wounds, leave, or other lawful cause. See
50 U.S.C. § 3911(2).
18
For servicemembers who enter active duty, SCRA protections generally begin on the
date they enter active duty military service. See 50 U.S.C. § 3911(3). For military
reservists, protections begin upon the receipt of certain military orders. See 50 U.S.C. §
3917(a).
19
See 50 U.S.C. § 3955(a)(2).
Page 7 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
under SCRA are granted protections against default judgments—which
are rulings made by a court against a party who fails to defend against a
claim or comply with a court order—as well as the ability to temporarily
delay, or stay, proceedings under certain circumstances.
Table 1. Examples of Rights Provided under USERRA and SCRA to Help Servicemembers Pursue Claims
Right
USERRA
SCRA
Private right of action to pursue claims in federal court
a
Flexibility with respect to certain statutes of limitations
b
Prohibition on fees and court costs
c
Protections against default judgments for inaction due to military service
d
Delay proceedings for servicemembers in military service or up to 90 days after
e
Source: GAO review of the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended (USERRA), and the Servicemembers Civil Relief Act, as amended (SCRA). │
GAO-21-221
Note: USERRA protections apply to those with an obligation or intention to perform “service in the
uniformed services.” This means the performance of duty on a voluntary or involuntary basis in a
uniformed service under competent authority and includes active duty, active duty for training, initial
active duty for training, inactive duty training, and full-time National Guard duty, among other things.
See 38 U.S.C. § 4303(13) & (16). SCRA protections apply to members of the uniformed services
during a period of military service; under SCRA, the term “military service” is defined as including full-
time active-duty members of the Army, Navy, Air Force, Marine Corps, and Coast Guard; reservists
on federal active duty; members of the National Guard on federal orders for a period of more than 30
days; commissioned officers in active service of the Public Health Service or the National Oceanic
and Atmospheric Administration; and servicemembers absent from active duty on account of
sickness, wounds, leave, or other lawful cause. See 50 U.S.C. § 3911(1) & (2).
a
See 38 U.S.C. § 4323(a)(3) and 50 U.S.C. § 4042.
b
See 38 U.S.C. § 4327(b) and 50 U.S.C. § 3936(a).
c
See 38 U.S.C. § 4323(h)(1).
d
See 50 U.S.C. § 3931.
e
See 50 U.S.C. § 3932.
Mandatory arbitration clauses have affected servicemembers’ ability to
assert their employment and consumer rights under USERRA and SCRA
Mandatory Arbitration
Clauses Have
Prevented
Servicemembers from
Resolving Certain
Employment and
Consumer Claims in
Court
Page 8 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
by preventing some from having their claims resolved in court.
20
Federal
court cases brought by private attorneys that we reviewed generally
upheld the enforceability of mandatory arbitration clauses.
21
In these
cases, servicemembers who entered into contracts or agreements that
contained mandatory arbitration clauses were not able to resolve their
claims in court. For example, in a 2006 opinion involving an officer in the
United States Marine Corps Reserve who alleged being fired because of
his military status in violation of USERRA, the U.S. Court of Appeals for
the Fifth Circuit held that an agreement containing a mandatory arbitration
clause was enforceable and that the servicemember’s claim was to be
compelled into arbitration.
22
In reaching its decision, the court stated that
it was not evident based on the text of USERRA that Congress intended
to preclude arbitration by granting servicemembers the possibility of
pursuing claims in federal court. In addition, the court differentiated
between the substantive rights (i.e., those relating to compensation and
working conditions) and procedural rights (i.e., those related to forums of
dispute resolution) provided under USERRA, reasoning that the latter
could be waived by an agreement to arbitrate.
23
The U.S. Courts of Appeals for the Sixth, Seventh, Ninth, and Eleventh
Circuits have also found that servicemembers who pursue employment
claims under USERRA in court can instead be compelled into
arbitration.
24
For example, in a 2008 opinion, the Sixth Circuit held that a
20
The United States Supreme Court has stated that agreements to arbitrate statutory
claims are enforceable pursuant to the Federal Arbitration Act. See Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991). The Federal Arbitration Act, which
is codified in Title 9 of the U.S. Code, was enacted to place arbitration agreements on the
same footing as other contracts. See id. at 24. Individuals who enter into contracts or
agreements with mandatory arbitration clauses do not forgo the substantive rights
provided by a statute. Instead, they only submit to the resolution of disputes in an arbitral,
rather than a judicial, forum. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 628 (1985).
21
The federal court cases discussed in this report are not intended to be an exhaustive
list. In addition, because the nature of legal proceedings depends on the facts and
circumstances of individual cases, these cases are not generalizable.
22
See Garrett v. Circuit City Stores, Inc., 449 F.3d 672, 674-75, 681 (5th Cir. 2006).
23
See id. 677-78 (“An agreement to arbitrate under the FAA is effectively a forum selection
clause . . . not a waiver of substantive statutory protections.”)
24
See Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559, 563 (6th Cir. 2008), Bodine v.
Cook’s Pest Control Inc., 830 F.3d 1320, 1327-28 (11th Cir. 2016), Ziober v. BLB
Resources, Inc., 839 F.3d 814, 821 (9th Cir. 2016), and Gupta v. Morgan Stanley Smith
Barney, LLC, et al., 934 F.3d 705, 715-16 (7th Cir. 2019).
Page 9 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
mandatory arbitration clause was enforceable against a member of the
National Guard who alleged his employer demoted him in violation of
USERRA upon returning from service in Afghanistan. In a concurring
opinion, one of the judges deciding the case noted that USERRA, as
written, does not clearly express the intent of Congress to prevent
arbitration of employment claims under USERRA.
25
Additionally, in a
2016 opinion, the Ninth Circuit held that a mandatory arbitration clause
could be enforced against a Navy Reserve Lieutenant who alleged he
was fired in violation of USERRA after providing notice of his deployment
to Afghanistan. The Ninth Circuit similarly concluded that, as written,
USERRA does not prohibit the compelled arbitration of claims. In
concurring with the opinion, one of the judges deciding the case noted
that Congress could amend USERRA to make clear that it prohibits the
use of mandatory arbitration clauses to prevent servicemembers from
pursuing claims in court.
26
Similarly, federal courts have held that mandatory arbitration clauses are
enforceable in cases involving servicemembers’ consumer claims under
SCRA.
27
As with the cases we reviewed involving USERRA claims, these
servicemembers were prevented from resolving SCRA claims in court. In
cases we reviewed, servicemembers were also prevented from engaging
in class actions.
28
For example, a federal district court held in 2011 that a
mandatory arbitration clause containing a class-action waiver provision
was enforceable against a captain in the Judge Advocate General’s
Corps of the United States Army Reserve who asserted his rights under
25
See Landis v. Pinnacle Eye Care, LLC, 537 F.3d at 563 (Cole, J. concurring).
26
See Ziober v. BLB Resources, Inc., 839 F.3d at 822 (Watford, J. concurring).
27
See Wolf v. Nissan Motor Acceptance Corp., No. 10-cv-03338-NLH-KMW, 2011 WL
2490939, at *7-*8 (D.N.J. June 22, 2011) and Beard v. Santander Consumer USA, Inc.,
No. 11-cv-01815-LJO-BAM, 2012 WL 1576103, at *1 (E.D. Cal. May 3, 2012) (adopting
the findings and recommendations of the Magistrate Judge in Beard v. Santander
Consumer USA, Inc., No. 11-cv-01815-LJO-BAM, 2012 WL 1292576, at *13 (April 16,
2012)).
28
Some cases involve class-action waivers, which are promises to forgo the right to
pursue class claims, meaning to participate in class action lawsuits. An academic
researcher told us these waivers create a particular challenge for individual
servicemembers who think their rights under SCRA have been violated, because
individuals in general rarely pursue the types of cases that are brought in class-action
lawsuits against companies. According to an official from the State Attorney General’s
Office of a state with one of the highest concentrations of active duty servicemembers and
reservists, in his experience, almost all mandatory arbitration clauses contain class-action
waivers.
Page 10 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
SCRA in terminating a car lease.
29
The court stated that despite the
servicemember’s “legitimate concern” about the burden that class-action
waivers could impose on servicemembers, SCRA, as written, does not
invalidate a class action or arbitration waiver provision. As a result, the
court concluded that the mandatory arbitration clause and its class-action
waiver did not deprive the servicemember of any rights or privileges
under SCRA.
30
In contrast to federal court cases brought by private attorneys under
USERRA or SCRA that we reviewed, servicemembers who seek
assistance from DOJ have not been compelled into arbitration. According
to agency officials, DOJ, the Department of Labor (DOL), and DOD can
often help informally resolve claims for servicemembers by educating
employers and companies about servicemember rights. In these
instances, servicemembers may avoid legal proceedings that trigger
motions to compel arbitration.
31
Additionally, certain types of claims
brought by DOJ under SCRA and USERRA cannot be compelled into
arbitration. DOJ has the authority to investigate consumer claims under
SCRA and initiate a lawsuit in federal court on behalf of the United
States.
32
DOJ officials told us that, as a result of this authority, mandatory
arbitration clauses have no effect on DOJ’s ability to pursue these claims.
Stakeholders said at least two of the 46 SCRA claims DOJ handled from
December 2008 to November 2020 involved mandatory arbitration
clauses.
• In 2011, DOJ filed a lawsuit against and reached a settlement with a
mortgage company, requiring it to pay at least $2.35 million for
29
See Wolf v. Nissan Motor Acceptance Corp., 2011 WL 2490939, at *7-*8.
30
See id. *5
31
Officials from the Office of Special Counsel (OSC) told us federal agencies cannot
require employees to enter into arbitration.
32
DOJ may commence a civil action in federal court against any person who engages in a
pattern or practice of violating SCRA or engages in a violation of SCRA that raises an
issue of significant public importance. See 50 U.S.C. § 4041.
Page 11 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
allegedly foreclosing on the houses of approximately 17
servicemembers without court orders in violation of SCRA.
33
• In 2015, DOJ reached a settlement with an automobile lender in which
the company agreed to pay at least $9.35 million for illegally
repossessing over 1,100 vehicles in violation of SCRA. In the release
announcing the settlement, DOJ stated it opened its investigation after
learning the company used an arbitration clause included in a loan
document to prevent a servicemember from pursuing a class action
lawsuit alleging repossession of servicemembers’ vehicles in violation
of SCRA. Through DOJ’s intervention, servicemembers received
$10,000 for each car towed, plus any lost equity with interest;
however, the original servicemember who brought the issue to DOJ’s
attention was compelled to arbitrate his claim and received $6,500,
along with an award to cover his attorneys’ fees and costs.
In contrast to SCRA, under which mandatory arbitration clauses do not
limit DOJ’s ability to investigate potential violations or initiate lawsuits in
federal court, mandatory arbitration clauses can be enforced in claims
against private employers under USERRA, in which DOJ serves as
attorney for, and appears on behalf of, servicemembers.
34
Additionally in
contrast to SCRA, DOJ does not have authority to initiate investigations
or pursue enforcement actions under USERRA on behalf of a
servicemember unless DOL’s Veterans’ Employment and Training
Service (VETS) refers the claim to DOJ. As such, DOJ has authority to
initiate lawsuits against employers only if a claim gets referred to it from
VETS. DOJ officials further told us they were unsure if, as written,
USERRA enables DOJ to represent servicemembers in arbitration.
However, since 2004—when DOJ’s Civil Rights Division assumed
enforcement authority for USERRA—DOJ has filed 109 USERRA
lawsuits and favorably resolved 200 USERRA complaints either through
33
In an earlier case against the mortgage company, defendants unsuccessfully attempted
to compel a sergeant in the National Guard to arbitrate a consumer claim under SCRA
that he pursued in court with a private attorney. See Hurley v. Deutsche Bank Tr. Co.
Americas, 610 F.3d 334, 338-40 (6th Cir. 2010). However, the issue in the case was
whether the defendants had given up their right to arbitrate, not whether the mandatory
arbitration clause was otherwise valid and enforceable.
34
In claims against a state as an employer, DOJ appears in court as attorney for the
United States and brings any legal action in federal court, based on the claims of a
servicemember, in the name of the United States. As a result, similar to consumer claims
under SCRA, DOJ’s ability to initiate a lawsuit against state employers under USERRA is
not affected by mandatory arbitration clauses.
Page 12 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
consent decrees obtained in those suits or through private settlements,
and DOJ officials said employers in USERRA claims referred to DOJ
have not compelled a servicemember into arbitration.
35
To strengthen its ability to enforce USERRA, among other things, DOJ
and DOL made joint recommendations regarding USERRA in annual
reports to Congress from 2014 through 2016.
36
Among these
recommendations, the agencies requested that USERRA be amended to
allow the Attorney General, acting on behalf of the United States, to serve
as a plaintiff in all employment claims under USERRA, rather than only in
claims against state employers. This potential change in the law would
prevent USERRA claims brought by DOJ against private employers on
behalf of servicemembers from being compelled into arbitration. Also,
DOL officials told us that in response to court rulings enforcing mandatory
arbitration clauses against servicemembers, their joint recommendations
included a request for Congress to clarify that USERRA protects
servicemembers’ procedural rights—which some courts have interpreted
as including the right to pursue claims in court—as well as their
substantive rights, such as the right to prompt reemployment after
completing their service. DOL and DOJ further recommended that
Congress explicitly note that mandatory arbitration clauses are
unenforceable on servicemembers unless all parties consent to arbitration
after a complaint on the specific claim has been filed. Legislation has not
been enacted to implement these recommendations.
Some stakeholders we spoke with told us that, in their view, USERRA
and SCRA were intended to preserve servicemembers’ right to pursue
claims in court. DOL officials told us their prior recommendations to
Congress were based on their interpretation of USERRA at the time.
Specifically, DOL officials told us their interpretation was based on a
provision in USERRA that protects both procedural and substantive rights
from being constrained or eliminated by contracts or agreements, such as
35
In fiscal year 2019, the most recent year for which data are available in DOL’s annual
USERRA reports, DOJ deemed as meritorious 16 of the employment claims under
USERRA referred from DOL VETS. Overall in fiscal year 2019, DOJ filed three
employment claims under USERRA.
36
See, for example, DOL, Uniformed Services Employment and Reemployment Rights Act
of 1994 Fiscal Year 2015 Annual Report to Congress (July, 2016).
Page 13 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
those containing mandatory arbitration clauses.
37
Similarly, an academic
researcher and a lawyer who represents servicemembers in SCRA cases
told us that in their view, the intent of SCRA is to grant servicemembers
the right to pursue claims in court. Additionally, DOD officials responsible
for managing the U.S. Navy’s legal assistance program, as well as
representatives of organizations that represent servicemembers and
attorneys, said that, in their view, requiring servicemembers to submit to
arbitration could prevent them from availing themselves of potentially
important processes that are typically available in a judicial forum, such
as robust discovery or the ability to appeal interpretations of the law.
Representatives of employers and firms that administer arbitrations told
us arbitration has attributes that can benefit servicemembers. For
example:
• Representatives of a business organization told us arbitration is
generally designed to be easier for individuals, including
servicemembers, to use without an attorney than going to court. They
said if required to go to court to pursue employment and consumer
claims, servicemembers would be uniquely dependent on hiring
attorneys, because the demands of military service limit the time they
have to pursue claims on their own.
• Officers from two firms that in total administer thousands of
arbitrations each year told us they developed protocols to encourage
adherence with statutory rights, such as protection against fees and
costs under USERRA, or the ability to delay a proceeding under
SCRA.
38
37
See 38 U.S.C. § 4302(b). (“This chapter supersedes any [s]tate law . . . contract,
agreement, policy, plan, practice, or other matter that reduces, limits, or eliminates in any
manner any right or benefit provided by this chapter, including the establishment of
additional prerequisites to the exercise of any such right or the receipt of any such
benefit.”) Additionally, DOL officials noted that the preamble to DOL’s 2005 final
regulations implementing USERRA stated that this provision had been interpreted
expansively to include ‘a prohibition against the waiver in an arbitration agreement of an
employee’s right to bring a USERRA suit in [f]ederal court.” See Uniformed Services
Employment and Reemployment Rights Act of 1994, As Amended, 70 Fed. Reg. 75,246,
75,257 (Dec. 19, 2005). While SCRA does not contain a similar provision, it does
prescribe requirements that must be met for servicemembers to waive certain rights under
SCRA pursuant to a written agreement. See 50 U.S.C. § 3918. Waivers must be
prominently displayed in at least 12-point type and are only effective if made pursuant to a
written agreement that is executed during or after a servicemember’s period of military
service. See 50 U.S.C. § 3918(a) & (c).
38
The officers of one firm said they could not speak to the operation of other firms that
administer arbitrations, and that policies may vary among them.
Page 14 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Data collected by federal agencies are insufficient to determine the
prevalence of mandatory arbitration clauses and their effect on the
outcomes of claims servicemembers pursue using federal administrative
processes under USERRA and SCRA. Officials from DOD, DOL, DOJ,
and the Office of Special Counsel (OSC) told us their agencies do not
systematically collect data on claims under USERRA and SCRA involving
mandatory arbitration because these clauses generally do not affect the
agencies’ missions with respect to assisting servicemembers.
Because the agencies that assist servicemembers with employment and
consumer claims under USERRA and SCRA do not systematically track
the presence of mandatory arbitration clauses, it is not possible to
determine the prevalence of these clauses in the claims they administer.
Specifically, DOD, DOL, and DOJ officials told us their data systems are
not set up to document whether each servicemember pursuing a claim is
subject to a mandatory arbitration clause. Officials from each agency told
us their electronic records may include case notes for claims involving
these clauses. However, the officials were unsure of the extent to which
their case notes would actually identify the presence of mandatory
arbitration clauses in these claims or provide enough context to determine
if they affected the claims.
Even if agencies were to keep complete records on the presence of
mandatory arbitration clauses, data would still be missing for the
servicemembers who may be most affected by these clauses. This is
because no data exist for claims settled without litigation or claims
abandoned by servicemembers. Military legal assistance attorneys told us
some of these servicemembers may have been unaware of their
employment and consumer rights. They said an unknown number of
servicemembers subject to mandatory arbitration clauses may be
deterred from pursuing claims and may instead look for other jobs, fix
broken cars themselves, or pay down consumer debt they may otherwise
have been able to reduce or eliminate.
39
As a result, the extent to which
servicemembers encounter mandatory arbitration clauses is unknown.
39
Specifically, one DOD civilian expert and director of legal assistance at a large naval
base provided two examples in which mandatory arbitration clauses impeded his attempts
to seek resolution between servicemembers and businesses. He told us his ability to
provide additional examples was limited because his office does not maintain certain
documentation on these claims for longer than 2 years. Additionally, three legal assistance
attorneys told us that in instances when mandatory arbitration is, or could become, an
impediment to servicemembers’ pursuits of claims, they advise servicemembers about the
arbitration process and explain to them that they have waived their right to litigation.
Data Needed to
Determine the
Prevalence of
Mandatory Arbitration
Clauses and Their
Effect on Outcomes
of Claims under
USERRA and SCRA
are Insufficient or Do
Not Exist
Page 15 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Data on claims pursued through arbitration are also limited. The parties
involved may agree to keep the substance and outcomes of arbitrations
confidential. This could include information on whether arbitration
involved an unemployment or consumer claim under USERRA or SCRA.
Officers at one arbitration administrator told us the parties to arbitrations
generally sign agreements to keep the proceedings confidential.
Additionally, the data certain arbitration administrators collect to meet
state requirements do not include key information needed to identify
arbitrations involving claims under USERRA or SCRA. Although the data
generally identify arbitrations as pertaining to consumer or employment
disputes, they do not specify whether arbitrations involved claims under
USERRA or SCRA.
Although data on specific arbitration cases are limited, we found through
our search of arbitrations administered by the Financial Industry
Regulatory Authority (FINRA), which publishes information on the
underlying statutes pertinent to the outcome of arbitrations, two instances
in which arbitrators specifically enforced servicemembers’ rights under
USERRA with respect to fees and costs. In a 2015 award, arbitrators
awarded $172,000 to a servicemember who pursued a claim under
USERRA against his employer. The arbitrators also found the employer
liable for the servicemember’s attorneys’ fees and costs, totaling over
$262,000, as well as the costs of administering the arbitration, totaling
more than $36,000. In awarding attorneys’ fees and costs, the arbitrators
specifically cited USERRA’s protections against fees and costs.
40
In a
2011 award, arbitrators ruled against a servicemember’s claim under
USERRA but assigned the costs of the arbitration to the employer,
similarly citing USERRA’s protections against fees and costs.
41
We provided a draft of the report to the Departments of Defense, Labor,
and Justice, OSC, CFPB, and the Equal Employment Opportunity
Commission (EEOC) for their review and comment. The Departments of
Defense, Labor, and Justice, OSC, and CFPB provided technical
40
See Rogers v. Citigroup Global Markets, Inc., Morgan Stanley Smith Barney, LLC, and
Citi Smith Barney, No. 11-01203 (2015).
41
See Ohlfs v. Charles Schwab & Co., Inc., No. 09-05551 (2011). Arbitrators ruled against
a servicemember’s employment claim under USERRA but assigned the costs of the
arbitration to the employer, citing 38 U.S.C. § 4323(h)(1) as protecting the servicemember
against these costs. Due to limitations in data on arbitrations, these examples cannot be
generalized.
Agency Comments
and Our Evaluation
Page 16 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
comments that we incorporated as appropriate. EEOC did not provide
any comments.
We are sending copies of this report to the appropriate congressional
committees, the Secretary of Defense, the Acting Secretary of Labor, the
Acting Attorney General, the Special Counsel, the Acting Director of
CFPB, the Chair of EEOC, and other interested parties. In addition, the
report is available at no charge on the GAO website at
http://www.gao.gov.
If you or your staff have any questions about this report, please contact
me at (202) 512-7215 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix III.
Sincerely yours,
Tranchau (Kris) T. Nguyen
Director
Education, Workforce, and Income Security
Appendix I: Objectives, Scope, and
Methodology
Page 17 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Our objectives were to examine: (1) the effect mandatory arbitration has
on servicemembers’ ability to file claims and obtain relief for violations of
USERRA and SCRA, and (2) the extent to which data are available to
determine the prevalence of mandatory arbitration clauses and their effect
on servicemember claims.
To examine the effect mandatory arbitration has on servicemembers’
1
ability to file claims and obtain relief for violations of the Uniformed
Services Employment and Reemployment Rights Act of 1994, as
amended (USERRA), and the Servicemembers Civil Relief Act, as
amended (SCRA), we interviewed a range of stakeholders involved in the
claims processes for these laws, including:
• Department of Defense (DOD) about the support they provide
servicemembers early in the claims process to address potential
conflicts with employers and companies by educating them on
servicemembers’ rights. Specifically, we spoke with DOD officials
responsible for developing policies and overseeing the offices that
provide legal assistance to members of the Armed Forces. Our
interviews included officials from the Employer Support of the Guard
and Reserve (ESGR)—DOD’s lead proponent for USERRA issues—
as well as officials from the Judge Advocate Generals Corps of the
Army, Air Force, and Navy, and the Judge Advocate Division of the
Marine Corps. We also interviewed military legal assistance attorneys
who manage legal assistance offices for the Army, Navy, and Coast
Guard in two states: Virginia and Washington. We selected legal
assistance offices in these two states because they reported varying
levels of consumer complaints to the Consumer Financial Protection
Bureau (CFPB) in 2018, and have bases with large numbers of
military personnel or joint bases where multiple branches of the
Armed Forces are stationed.
• Department of Labor’s (DOL) Veterans’ Employment and Training
Service (VETS), which investigates claims under USERRA, and the
Department of Justice (DOJ) Civil Rights Division, which determines
whether claims under USERRA and SCRA have merit and either
attempts to facilitate an informal resolution of the claim or initiates
legal action against employers and other companies. We also spoke
1
Unless otherwise specified, we use the term servicemembers to refer to active-duty
personnel as well as members of the Reserve Components of the Armed Forces, which
include the Army National Guard of the United States, Army Reserve, Marine Corps
Reserve, Air National Guard of the United States, Air Force Reserve, and Coast Guard
Reserve. Although USERRA and SCRA provide some benefits to veterans, this report
focuses on servicemembers.
Appendix I: Objectives, Scope, and
Methodology
Appendix I: Objectives, Scope, and
Methodology
Page 18 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
with officials from the Office of Special Counsel, which reviews claims
against federal executive agencies under USERRA and may attempt
to facilitate informal resolution of claims or initiate actions before the
Merit Systems Protection Board, an independent quasi-judicial agency
in the federal executive branch.
• CFPB and the Equal Employment Opportunity Commission (EEOC)
because, while neither agency has enforcement responsibilities for
USERRA or SCRA, they provide useful insights on mandatory
arbitration. For example, CFPB collects data on consumer complaints,
including those of servicemembers, maintains an Office of
Servicemember Affairs, and promulgated regulations prescribing
certain restrictions on mandatory arbitration clauses based, in part, on
a 2015 report on the effects of these clauses.
2
In addition, EEOC has
been a party to litigation involving mandatory arbitration clauses.
3
• Former agency officials responsible for issues related to USERRA
and SCRA; a member of an association of State Attorneys General
who represents servicemembers in cases involving state laws that
provide consumer and employment rights to servicemembers; officers
from two firms that each administered at least one thousand
employment and consumer arbitrations each year from 2015 through
2019—the most recent 5 years for which complete data are available;
private attorneys who represent servicemembers in USERRA and
SCRA cases; academic researchers; and representatives of
associations that advocate the interests of servicemembers,
businesses, and attorneys.
We also reviewed federal court cases, federal laws and regulations, and
state laws that stakeholders identified as relevant, as well as settlement
information from DOJ and decisions from selected arbitrations.
4
In
2
See Bureau of Consumer Financial Protection, Arbitration Agreements, 82 Fed. Reg.
33,210 (July 19, 2017). The President signed a joint resolution by Congress disapproving
the rule, meaning the rule has no force or effect. See Pub. L. No. 115-74, 131 Stat. 1243
(2017).
3
The United States Supreme Court held that an agreement between an employer and an
employee to arbitrate employment-related disputes did not bar EEOC from pursuing
victim-specific judicial relief in an enforcement action alleging the employer violated Title I
of the Americans with Disabilities Act of 1990. See E.E.O.C. v. Waffle House, Inc., 634
Stat. 279, 297-98 (2002).
4
The federal court cases and arbitrations discussed in this report are not intended to be an
exhaustive list. In addition, because the nature of legal proceedings and arbitrations
depends on the facts and circumstances of individual cases, these cases are not
generalizable.
Appendix I: Objectives, Scope, and
Methodology
Page 19 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
addition, we reviewed agency documents, academic and industry
research, and articles on the claims process. Last, we reviewed studies of
mandatory arbitration clauses and their prevalence more broadly in the
United States, including studies conducted or funded by CFPB, the
Economic Policy Institute, and the U.S. Chamber of Commerce Institute
for Legal Reform.
To examine the extent to which data are available to determine the
prevalence of mandatory arbitrations clauses and their effect on
servicemember claims, we identified and evaluated potential sources of
data on employment and consumer claims under USERRA and SCRA
that are collected by DOD, DOL, DOJ, OSC, and firms that administer
arbitrations, or maintained in court records. We discussed potential
sources of data with agency officials and officers of two arbitration
administrators responsible for maintaining them, and with other
stakeholders representing servicemembers, businesses, and attorneys.
We conducted this performance audit from May 2020 to February 2021 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Appendix II: Federal Administrative Process
for Certain Employment and Consumer Claims
by Servicemembers
Page 20 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Servicemembers—including members of the active and Reserve
Components of the U.S. Armed Forces—who believe their civilian
employers have violated their employment or reemployment rights under
the Uniformed Services Employment and Reemployment Rights Act of
1994, as amended (USERRA), and wish to file claims against their
employers can seek to resolve their claims through a federal
administrative process or through a separate, private right of action,
under which they can pursue claims with or without the assistance of
federal agencies. Under USERRA’s federal administrative process,
employees or applicants for employment who believe that their USERRA
rights have been violated may file a claim with the Department of Labor’s
(DOL) Veterans’ Employment and Training Service (VETS), which is the
entity that formally investigates and attempts to resolve claims.
1
DOL
VETS serves veterans, active-duty servicemembers and their spouses,
reservists, and members of the National Guard on issues related to
employment.
2
If DOL VETS cannot resolve claims to servicemembers’
satisfaction, DOL informs the servicemembers of their right to ask that the
claim be referred to the Department of Justice (DOJ) or the Office of
Special Counsel (OSC).
3
A claim is referred to DOJ if it involves state or
private employers, or to OSC if it involves federal executive branch
agencies.
If servicemembers elect to have claims referred to DOJ, it will conduct an
independent review of the administrative record compiled by DOL VETS.
If DOJ determines the claim has merit, it may attempt to facilitate private
settlements between employers and servicemembers, or initiate actions
for relief in federal court. In claims against private employers under
USERRA, DOJ forms an attorney-client relationship with the
servicemember, and may appear in federal court on behalf of an
individual servicemember. However, in claims against a state employer,
DOJ brings any legal action in federal court in the name of the United
1
Servicemembers can also seek help from a Department of Defense (DOD) legal
assistance office, which may provide administrative assistance such as contacting
employers to educate them about servicemembers’ employment rights. Additionally,
servicemembers can file informal complaints with DOD’s Employer Support of the Guard
and Reserve (ESGR), which can serve as ombudsmen to informally mediate USERRA
issues that arise between servicemembers and their civilian employers.
2
Veterans pursuing claims under USERRA can also seek to resolve their claims through
the same federal administrative process or through a separate, private right action.
3
DOJ has no jurisdiction over employment claims under USERRA unless DOL VETS
refers them to DOJ. Servicemembers have the right to request referrals to DOJ regardless
of whether DOL VETS finds their claims to have merit.
Appendix II: Federal Administrative Process
for Certain Employment and Consumer
Claims by Servicemembers
Federal Administrative
Process for Certain
Employment Claims by
Servicemembers
Appendix II: Federal Administrative Process
for Certain Employment and Consumer Claims
by Servicemembers
Page 21 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
States. In claims against federal executive branch agencies, OSC may
similarly try to facilitate an informal resolution or appear on behalf of, and
act as attorney for, servicemembers and initiate actions before the Merit
Systems Protection Board (MSPB), an independent quasi-judicial agency
in the federal executive branch. Servicemembers can also choose at any
point in the administrative process to initiate actions in court without
federal assistance, under their private right of action (see fig. 1).
Figure 1. Examples of Process for Resolving Civilian Employment Claims under USERRA
Note: USERRA protections apply to those with an obligation or intention to perform “service in the
uniformed services.” This means the performance of duty on a voluntary or involuntary basis in a
uniformed service under competent authority and includes active duty, active duty for training, initial
active duty for training, inactive duty training, and full-time National Guard duty, among other things.
See 38 U.S.C. § 4303(13) & (16).
a
Servicemembers may seek assistance from local military legal assistance offices, which may be
located at military bases.
b
The Department of Justice (DOJ) may appear on behalf of, and act as attorney for, servicemembers
in claims against private employers by commencing an action in federal court. For servicemembers
with claims against state employers, DOJ can commence an action in court in the name of the United
States. Servicemembers with claims against federal executive branch agencies can request the
Department of Labor’s VETS to refer their claims to the Office of Special Counsel (OSC). OSC may
Appendix II: Federal Administrative Process
for Certain Employment and Consumer Claims
by Servicemembers
Page 22 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
appear on behalf of, and act as attorney for, servicemembers before the Merit Systems Protection
Board.
Similar to the process for resolving employment claims under USERRA,
servicemembers can seek help from federal agencies to resolve their
consumer claims under the Servicemembers Civil Relief Act, as amended
(SCRA) administratively, or they can initiate a civil action in court (see fig.
2). Servicemembers may seek help from a DOD legal assistance office,
which may provide administrative assistance such as contacting
companies to educate them about servicemembers’ consumer rights.
Legal assistance attorneys may refer claims to DOJ, the agency with
enforcement authority for SCRA.
4
Servicemembers can also file
consumer claims under SCRA directly with DOJ. In addition, DOJ may
initiate its own civil action in federal district court following an investigation
under its own enforcement authority.
5
Figure 2. Example of Process for Resolving Consumer Claims under SCRA
4
Additionally, some servicemembers seek assistance from the Consumer Financial
Protection Bureau (CFPB), which may refer their claims to DOJ.
5
DOJ may commence a civil action in federal court against any person who engages in a
pattern or practice of violating SCRA or engages in a violation of SCRA that raises an
issue of significant public importance.
Federal Administrative
Process for Certain
Consumer Claims by
Servicemembers
Appendix II: Federal Administrative Process
for Certain Employment and Consumer Claims
by Servicemembers
Page 23 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Note: SCRA protections apply to members of the uniformed services during a period of military
service; under SCRA, the term “military service” is defined as including full-time active-duty members
of the Army, Navy, Air Force, Marine Corps, and Coast Guard; reservists on federal active duty;
members of the National Guard on federal orders for a period of more than 30 days; commissioned
officers in active service of the Public Health Service or the National Oceanic and Atmospheric
Administration; and servicemembers absent from active duty on account of sickness, wounds, leave,
or other lawful cause. See 50 U.S.C. § 3911 (1) & (2).
a
The Department of Justice may initiate a civil action in federal court against any person who engages
in a pattern or practice of violating SCRA or engages in a violation of SCRA that raises an issue of
significant public importance.
Appendix III: GAO Contact and Staff
Acknowledgements
Page 24 GAO-21-221 Servicemembers and Mandatory Arbitration Clauses
Key contributors to this report were Kimberley Granger (Assistant
Director), Tom Moscovitch, Joel Marus, Marshal Pennock, and John
Villecco. Other contributors included Vince Balloon, James Bennett,
Christina Bixby, Alicia Puente Cackley, Linda Collins, Holly Dye, Brenda
Farrell, Laura Hoffrey, Yvonne Jones, Shelia R. McCoy, Jean McSween,
Stacy Ouellette, Cady Panetta, Joy Solmonson, Almeta Spencer, Kate
van Gelder, Jason Vassilicos, and Adam Wendel.
Appendix III: GAO Contact and Staff
Acknowledgements
GAO Contact:
Staff
Acknowledgments:
(104318)
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