On September 20, 2019, the U.S. House of Representatives passed H.R. 1423, the “Forced Arbitration Injustice Repeal Act,” or FAIR Act by a vote of 225-186, with only two Republicans voting for the bill, and two Democrats voting against it.  The bill would ban the type of pre-dispute, mandatory (or “forced”) arbitration agreements that require consumers, employees, and some businesses and individuals to use a private arbitrator instead of going to court when they have a legal dispute with their employers or providers of goods or services.  They face the prospect of losing their jobs or not being hired, not getting a service or product or credit, or not being able to do business if they do not agree to arbitrate.  The Judiciary Committee Report, No. 116-204, provides the following description of the legislation:

H.R. 1423, the ‘‘Forced Arbitration Injustice Repeal Act’’ or the ‘‘FAIR Act,’’ would prohibit the enforcement of mandatory, pre-dispute arbitration (‘‘forced arbitration’’) provisions in contracts involving consumer, employment, antitrust, and civil rights disputes.  This critically important measure would restore access to justice for millions of Americans who are currently locked out of the court system and are forced to settle their disputes against companies in a private system of arbitration that often favors the company over the individual. H.R. 1423 is supported by a broad coalition of more than 70 public interest, labor, and advocacy organizations, including Public Citizen, Consumer Reports, the American Association of Justice, the Communications Workers of America, the Leadership Conference on Civil Rights, and the American Antitrust Institute.

There has been no action on the companion Senate bill, S. 610, and it is unlikely that the Senate will approve it.

The bill addresses the problems associated with arbitration agreements in which one party, such as a consumer wishing to open a bank account, or a prospective employee, is “offered” the opportunity to sign the agreement on a take-it-or-leave-it basis before any dispute arises. The agreements waive the parties’ rights to resolve any legal disputes in court and instead must go to an arbitrator.  In addition, many of the agreements waive the parties’ rights to bring class actions, an important tool in many employment, civil rights and consumer disputes where the dollar amount at issue per claimant may be relatively small, but the dollar amount for a group of claimants with virtually identical claims is quite large.

H.R. 1423 addresses only pre-dispute forced arbitration agreements in the consumer, employment, antitrust and civil rights arenas because the parties’ unequal bargaining power, the waiver of group rights and mandated arbitration terms are problematic, particularly when the parties’ dispute involves alleged violations of employment, banking, finance, civil rights, and other laws.  H.R. 1423 does not disturb or affect the types of arbitration agreements where the problems that led to the bill do not exist.  For example, H.R. 1423 does not regulate collectively bargained contracts between unions and employers because the parties have relatively equal bargaining power and have a long history of choosing to use multi-step grievance and arbitration processes to resolve individual and group disputes, mostly about violations of union-management contracts, not violations of state or federal law.  Similarly, the bill would have no effect on the arbitration agreements between businesses which often involve contractual, not statutory disputes, the parties have roughly equal amounts of bargaining power, one party does not mandate all the terms of the agreement for the other party, and there are usually no issues related to the waiver of the rights of a large group or class of claimants.

For general information about the bill see here.