Congress Addresses Use Of Controversial Forced Arbitration Clauses In Two Bills
Civil Rights Policy Brief #185 | By: Rodney A. Maggay | March 21, 2022
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Policy Summary
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On March 17, 2022 the United States House of Representatives passed H.R. 963. The bill is known as the Forced Arbitration Injustice Repeal (FAIR) Act. The bill passed by a 222 – 209 vote. Introduced by Congressman Hank Johnson (D-GA) the bill will ban the enforcement of forced arbitration clauses for consumers, employees and small businesses involved in legal disputes. The bill would apply to all kinds of workplace and consumer disputes that have become routine in consumer and worker contracts.
This bill follows a bill signed by President Joe Biden on March 3, 2022. That bill, known as the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, would amend the Federal Arbitration Act (FAA) to make pre – dispute arbitration agreements for sexual assault and sexual harassment claims invalid and unenforceable. There was bipartisan support for this bill as it passed the House of Representatives by a 335 – 97 vote and passed the Senate by a voice vote.
While the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 has become law the FAIR Act now moves to the Senate where its future there is uncertain. LEARN MORE, LEARN MORE, LEARN MORE
Policy Analysis
According to the Economic Policy Institute companies that have forced arbitration clauses in their contracts with consumers and employees have created a significant problem for consumers and employees who want to pursue their disputes against large corporations.
While arbitration laws in states and in foreign countries vary, a typical situation begins when the consumer or employee is first presented with the terms governing the transaction for a consumer and the terms of employment for an employee. Many of these agreements often contain a contractual clause that obligates the consumer or the employee to settle any disputes they may have through an arbitration hearing. For a consumer, an arbitration clause will usually prohibit the consumer from pursuing their dispute in court or as part of a class action.
For an employee, the arbitration clause will prohibit the employee from pursuing employment disputes, discrimination claims and a number of other employment issues in court. The only recourse these parties would have is to pursue their claim in an arbitration proceeding. Oftentimes a consumer or employee would be unable to have this clause removed from their contract or agreement as companies have made the contract a “take it or leave it” situation. A consumer or employee simply clicks “Agree” or signs the contract with the forced arbitration clause in order to continue with the transaction or continue employment.
But when a situation arises and the consumer or employee find themselves in the middle of a dispute, the party has no choice but to go through the arbitration process. The process is flawed because protections that are often utilized in court are not used in arbitration proceedings. Sometimes the arbitrator is chosen by the company which raises a number of conflict of interest issues. Or, the party is told that the hearing is informal and so parties do not bring a lawyer who might help protect them at the hearing. The arbitrator simply listens to both sides, sometimes even without a court reporter, and then issues a decision. Sometimes that decision is simply issued without a written report that lists the reasons for the decision. And, some arbitration clauses are binding which means that the decision of the arbitrator is not appealable. Consumers and employees are forced into a closed session which can be intimidating because the hearing is usually put together by the large corporation alone.
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The arbitration bills that Congress considered this month seeks to change the secrecy and one – sidedness that arbitration hearings have become. The rationale of these two bills is that people with legitimate disputes against large corporations should be permitted to have their claims heard in open court. This will allow evidence to be introduced in a transparent public forum where a jury can decide instead of having relevant information suppressed behind closed doors. And it will allow for any decisions made to be supported by reason and evidence that is put to paper instead of decisions in a closed session that may be arbitrary.
A significant benefit from these bills would be in the cases of sexual assault and sexual harassment in employment cases. Employees who were the victim of sexual assault and sexual harassment and who then were forced to pursue their claims in forced arbitration often found that companies could easily hide the instances of sexual misconduct. This did not stop the incidents of sexual misconduct but only created an atmosphere where the sexual misconduct was repeated and then covered up again. The bill passed by Congress directly addresses those situations and effectively bars the use of forced mandatory arbitration in sexual misconduct cases and allows people to now pursue a sexual harassment claim in open court. There it can now publicly hold the offending company or employer responsible.
However, the second bill, the FAIR Act still needs to be passed by the Senate. This bill is broader in that it would apply to more than just sexual misconduct cases. It would apply to nearly all consumer and employment disputes such as labor, antitrust and civil rights disputes.
If the arguments supporting the bill to end forced arbitration in sexual harassment cases are valid – more open and transparent hearings, the availability of legal protections in court and no forfeit of claims and ability to pursue them freely – then those same arguments also apply to the FAIR Act and why it needs to be passed, too. The FAIR Act would be restoring rights to workers and consumers and allow them to have their day in court to plead the harms they may have suffered. Large corporations should no longer be allowed to bypass the court system and deprive millions of Americans of a fair hearing on important situations that affect their everyday lives. The bill holding forced arbitration clauses for sexual misconduct unenforceable has now been passed.
The companion bill holding forced arbitration clauses unenforceable for all consumer and employment agreements should be enacted into law, too. Instead of letting an arbitrator decide these important disputes, it should be up to the courts decide. LEARN MORE, LEARN MORE, LEARN MORE
This brief was compiled by Rod Maggay. If you have comments or want to add the name of your organization to this brief, please contact Rod@USResistnews.org.
Engagement Resources
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Economic Policy Institute (EPI) – report and criticisms of the use of forced arbitration clauses in consumer and employee contracts.
American Civil Liberties Union (ACLU) – article from non – profit group urging end to forced arbitration clauses.