A Step Toward Protecting Our Elderly

The U.S. Department of Health & Human Services (“DHHS”) took a major step towards protecting our elderly. On Wednesday September 28, 2016, the DHHS issued a final rule that prohibits nursing homes or assisted-living facilities that receive federal funding from entering into pre-dispute arbitration agreements. The DHHS rule, which impacts approximately 1.5 million nursing home residents across the U.S., was issued following a number of government officials’ complaints regarding the unconscionable impact of arbitration clauses on the elderly.

An arbitration clause is a provision often embedded in the fine print of a contract which waives the parties’ rights to resolution of disputes via a lawsuit in the public judicial system. Instead, the parties to the contract are forced to resolve their disputes without the benefit of a jury trial.

While the new rules’ impact seems trivial on paper, its implications are significant. The current arbitration system has allowed nursing homes to reduce their legal costs and hide their wrongdoings from the public. This comes at the costs of the elderly and their families, who are often left without transparency on nursing home abuses and often subject to allegedly biased arbitrators when a dispute arises.

The DHHS rule does not formally address whether nursing homes can bind residents with class action waivers, legal vehicles that essentially waive the only opportunity an individual may realistically have to pursue his or her claim. The DHHS has noted that “[b]ecause class actions against [nursing facilities] remain rare, we believe that it is not yet clear that there is a problem that would require additional regulation.” Therefore, while federally funded nursing homes are now prohibited from pre-dispute binding of residents to arbitration, there arguably remains no legal impediment to implementing class action waivers which could essentially alleviate the nursing homes from large scale liability. Accordingly, while the DHHS’ new rule is a strong first step towards protecting our elderly, whether elderly residents will be able and willing to seize their now granted day in court will remain unclear until the DHHS issues a rule on class actions.  

Disclaimer: The foregoing in no way constitutes legal advice from any attorney or from Faruqi & Faruqi, LLP. The opinions expressed herein are the opinions of attorney Ben Heikali and in no way reflect the opinions of Faruqi & Faruqi, LLP.

About Faruqi & Faruqi, LLP

Faruqi & Faruqi focuses on complex civil litigation, including securities, antitrust, wage and hour, and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Delaware and Pennsylvania. Since its founding in 1995, Faruqi & Faruqi has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, consumers and employees.

To schedule a free consultation with our attorneys and to learn more about your legal rights, call our offices today at (212) 983-9330.

About Ben Heikali

Ben Heikali is an Associate in Faruqi & Faruqi, LLP’s Los Angeles office. Mr. Heikali focuses his practice on consumer class actions, representing plaintiffs in a variety of consumer fraud and false advertising cases. Please feel free to contact Mr. Heikali regarding any questions concerning this blog post or any questions related to F&F’s practice areas.


Posted by Ben Heikali

Partner at Faruqi & Faruqi, LLP
California Office
Tel: (424) 256-2884
Fax: (424) 256-2885
Email: bheikali@faruqilaw.com

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