FAIR Act Passes the House but Faces a Steep Climb in the Senate

In mid-September 2019, lawmakers in the House of Representatives (“House”) passed the Forced Arbitration Injustice Repeal Act (FAIR). This bill bars businesses from forcing their employees, as well as their customers, to resolve legal disputes via private arbitration. With arbitration, there is no jury, no judge, and very little governmental oversight.

Arbitration clauses, often seen in customer and employment contracts, block employees and customers from pursuing litigation in an open forum based on allegations of sexual harassment, wage theft, racial discrimination, and just about anything else. Workers rarely win in private arbitration. When they do win, they often see less in compensation than they would in court. If the FAIR Act ultimately becomes law, more than 60 million workers in the United States, who previously signed away their right to sue in court, will regain full access to them.

A Brief Explanation of the FAIR Act

Initially, this bill came to light because of the efforts of both Representative Hank Johnson of Georgia and Senator Richard Blumenthal of Connecticut. It would prevent businesses from forcing mandatory arbitration clauses on employees and customers. It would also invalidate ceratin arbitration agreements previously agreed upon, as permitted by law. This bill has passed the House, but is expected to be strongly resisted by the Republicans in the Senate.

Many Workers May Give Up Their Rights to Sue Without Knowing It

Sixty million Americans have given up their right to go to court to earn a paycheck. Employees regularly sign hiring documents without thoroughly reading them or having them reviewed by an attorney. Some of the largest companies in the United States, including Walmart, Google, McDonald’s, and Starbucks, require employees to accept mandatory arbitration as a condition of their employment.

When employees face wage theft, job discrimination, or overtime violations, their arbitration agreements make it impossible for them to seek justice by way of a jury. The secretive nature of arbitration agreements has been seen by some to have the ability to hamper the #MeToo movement as well. Women and employees of color are disproportionately affected by their subjection to arbitration agreements because they make up the most significant percentage of workers in industries that require arbitration, including retail, education, and healthcare.

Arbitration Favors Employers

Past Supreme Court rulings have opened the way for businesses to expand their use of mandatory arbitration. In the past, arbitration was primarily a tool used for contract disputes between businesses. Now, it covers legal disputes with employees and customers. Companies argue that arbitration is less expensive and is a quicker way to resolve employment conflicts. All of this is true.

However, it is also true that private arbitration allows companies to hide conduct that would be made public in court. Moreover, arbitrators are more inclined to rule in favor of employers, and they are less likely to give significant awards to workers when a company is found violating the law. According to information published by the American Arbitration Association from 2013 through 2017, there were approximately 8,200 complaints filed by employees and handled through arbitration. Arbitrators ordered monetary damages in only 1.8 percent of the cases. The vast majority, 78 percent of them, were resolved via an unspecified mutual resolution.

Additionally, arbitration lacks oversight. Arbitrators do not need to be neutral, they do not need to memorialize or publish their opinions, and there are very few avenues for appeal. Courts can only overturn an arbitrator’s decision if the appealing party can demonstrate a “manifest disregard of the law.” Most courts have interpreted this to mean that intervention is necessary only in the event of arbitrator fraud or misconduct.

The FAIR Act passed the House by a margin of 225 to 186. As of the time of this writing, the Senate has not put this bill up for debate.