AAA® Leveraging AI to Comply with State Consumer and Employment Arbitration Laws

By Neil Currie

For over 25 years, the American Arbitration Association® (AAA) has delivered fairness, efficiency and due process in consumer and employment arbitration. As the world’s leading alternative dispute provider, the AAA played a key role in developing the Consumer Due Process Protocol and the Employment Due Process Protocol, which established essential due process standards for arbitration in these areas. The AAA’s commitment to due process is reflected in its Rules, policies and procedures, including its administrative review of consumer and employment arbitration clauses for compliance with these Protocols.

The AAA takes seriously its obligation to comply with state and federal laws governing consumer and employment arbitration. To this end, the AAA has incorporated artificial intelligence (AI) into its compliance activities.

In 2003, California implemented Code of Civil Procedure §1284.3(a), prohibiting arbitrators and ADR providers from administering consumer and employment arbitrations where arbitration agreements contain “loser-pay” provisions—requiring consumers to pay the opposing party’s fees and costs if they do not prevail. New Jersey enacted a similar law in 2019, New Jersey Revised Statutes Title 2A, Section 2A:23B-35.  

To comply with these laws, the AAA has dedicated staff who review all contracts for California and New Jersey consumer and employment arbitration cases. Because the statutes do not explicitly apply only to the language in arbitration clauses, AAA staff must examine the entire contract, which is often time-consuming and can slow the initial intake process. Recognizing efficiency as a cornerstone of the ADR process, the AAA sought to streamline this review process to allow the parties' disputes to move forward promptly.

With the advent of AI, the AAA’s Compliance staff collaborated with the AAA’s Innovation team to explore generative AI applications for contract analysis. The goal was to develop a system to identify potential “loser-pay” language in consumer and employment contracts. Once the AI identifies that potential language, the trained experts on the Compliance team review the language to determine if the relevant statutes apply.

After extensive testing, including reviewing hundreds of contracts and multiple AI iterations, the Compliance team successfully implemented Vincent AI by vLex. Vincent AI enables the team to analyze lengthy contracts efficiently by flagging language that may potentially violate "loser-pay” statutes. The AI recommends whether contract language meets the criteria outlined in the statutes, and the Compliance team then reviews the language to make the final determination.

The Compliance team’s integration of Vincent AI into their processes has significantly enhanced the team's administrative review of contracts, providing accurate and efficient support through the initial intake process. This supports the AAA’s commitment to legal compliance while expediting case initiation for parties.

Looking ahead, the AAA will continue to explore AI-driven innovations to further enhance its compliance efforts in consumer and employment arbitrations.