The FAIR Act: Bringing Consent Back to Arbitration

The House of Representatives passed the Forced Arbitration Injustice Repeal Act (“The FAIR Act”) on September 20, 2019, and the legislation has been introduced into the Senate.  The FAIR Act’s purpose is to “prohibit pre-dispute arbitration agreements that force arbitration of future employment, consumer, antitrust, or civil rights disputes.”  This opens up judicial system access for Americans that would have signed an employment agreement with a forced arbitration clause. It would also void any existing clauses for over 60.1 million contracts that are currently in place for any future conflicts that arise after the Act becomes law.  According to the Economic Policy Institute  “more than half-53.9 percent-of nonunion private-sector employers ha[d] mandatory arbitration procedures” in 2017.  In addition, 65.1 percent of “establishments that were part of companies with 1,000 or more employees. . . had mandatory arbitration.”

Arbitration is usually less costly and more time-efficient than our court system. However, large corporations are often the ones to choose and pay for the arbitrator.  This could lead to a risk of potential undue bias favoring the corporation who is financing the resolution of the dispute.  The New York Times found that “rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients.”  While this is not always true, it is something that needs to be taken into consideration when weighing the equality of forcing a dispute resolution system upon an employee, by an employer that likely has superior knowledge of the contract negotiation and dispute resolution process. 

However, large corporations have recently been shifting with societal pressure.  Google’s employees had a walkout in November 2018 to protest private arbitration in dispute settlements with employees.  In response, The New York Times reported that the company announced a new policy that would “do away with the [forced private arbitration clause] practice for temporary staff, contract workers and vendors it hires.”  Google is following in the footsteps of Uber, Lyft and Facebook, who taken similar steps.  Large corporations are allowing themselves to be open to litigation instead of just private arbitration.  This emphasizes employees and their interests over boilerplate clauses.  These shifts demonstrate that employees want the opportunity to choose how their issues are heard and resolved. 

The FAIR Act legislation echoes this growing sentiment; “no such arbitration provision shall have the effect of waiving the right of a worker to seek judicial enforcement of a right arising under a provision of the Constitution of the United States, a State constitution, or a Federal or State statute, or public policy arising therefrom.”  The Act still allows for the voluntary use of arbitration, which tips the scales towards a more balanced division of power between employee and employer in disputes.  The power to have a choice of forum for one to have their dispute heard is a large gain for employees who are overlooked a majority of the time.  The bill empowers employees to settle disputes in a way they see fit, whether it is publicly in a court or privately in arbitration.  Employers are still able to settle their disputes with employees in a neutral arbitration with a speedy and reliable process, but the employees are now also able to choose how they want their complaint and dispute resolved.  Therefore, the potential of the negation of forced arbitration puts the sliding scale of decision-making power between employee and employer and ensures that arbitration is a process that every party is pursuing and entertaining if they so wish.

Sources Cited:

By Alex Bowles, Junior Staffer

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