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Nov 05, 2021

Anti-mandatory arb bill moves forward in House

Legislation has 201 co-sponsors

A congressional committee this week voted to send to the House of Representatives legislation that would end mandatory arbitration in many cases.

The House Judiciary Committee on Wednesday passed the Forced Arbitration Injustice Repeal (Fair) Act, which has bipartisan support. The bill, if passed into law, would prohibit pre-dispute arbitration agreements that force arbitration of employment, consumer, antitrust or civil rights disputes.

It would also prohibit agreements and practices that ‘interfere with the right of individuals, workers and small businesses to participate in a joint, class or collective action related to an employment, consumer, antitrust or civil rights dispute.’

The legislation deals with an issue that has been the subject of debate for years. Opponents of mandatory arbitration – which may be included in clauses of consumer or employment contracts, for example – argue that it denies individuals the opportunity to take their case to court and enjoy the protections of the full judicial process. Supporters argue that arbitration is fair and more cost-effective, potentially saving companies from paying large litigation bills to defend against what they see as frivolous claims. Under the Fair Act, individuals could still agree to arbitration but would not be required to do so.

‘My bill would restore fairness to the American justice system by reasserting individuals’ right to access the court system,’ Rep Hank Johnson, D-Georgia, says in a statement. ‘The Fair Act would ensure that men and women contracting with more powerful entities aren’t forced into private arbitration, where the bigger party often has the advantage of choosing the arbitrator in an unappealable decision.’

The House bill has more than 200 co-sponsors.

‘Arbitration clauses have permeated American life in recent decades. They’ve seeped into our cell-phone contracts, our medical paperwork and our employee handbooks with opaque language, written by well-paid corporate attorneys,’ Johnson states. ‘The clauses are hidden in updated terms and conditions, incorporated into mid-year employee reviews and implicit in purchase contracts. And they all prevent us from having our day in court. It is time for this to change… I appreciate my colleagues’ support as this bill moves to the full House for a vote.’

Senator Richard Blumenthal, D-Connecticut, earlier this year introduced the companion bill in the Senate with 39 Democratic co-sponsors.

House Judiciary Committee chair Jerrold Nadler, D-New York, said in a statement during the mark-up of the bill: ‘By burying a forced arbitration clause deep in the fine print of take-it-or-leave-it contracts, companies can evade the justice system, where plaintiffs have far stronger legal protections, and hide behind a one-sided process that is rigged in their favor.

‘For example, arbitration generally limits discovery, does not adhere to the rules of civil procedure, can prohibit class actions, may have no right of appeal, and the proceedings – and often even the results – must stay secret, allowing companies to avoid public scrutiny of potential misconduct.’

American Association for Justice CEO Linda Lipsen welcomed the vote, saying in a statement: ‘Corporations hide forced arbitration clauses in the fine print to avoid accountability by forcing workers, consumers and patients into a secretive, rigged system where they have almost no chance of getting justice. Disturbingly, the use of forced arbitration has been increasing at a time when Americans are especially vulnerable to corporate abuse. Today’s committee vote to advance the Fair Act was an important step toward Congress passing this bill as soon as possible.’

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...