House votes to end forced arbitration in business disputes
Washington – The House approved a bill Friday to end forced arbitration clauses that prevent workers and consumers from filing lawsuits in disputes with companies over employment practices, billing or civil rights.
Supporters, mostly Democrats, said the bill would restore access to justice for millions of Americans who are now locked out of the court system and forced to settle disputes against companies in a private arbitration system that often favors the company over the individual.
Opponents, mostly Republicans, said the measure would make it harder for individual workers or consumers by forcing them into lengthy, expensive court fights that may end up shutting them out of the justice system entirely.
The House approved the bill, 225-186, on Friday. It now goes to the Senate.
The Forced Arbitration Injustice Repeal Act, or FAIR, defends the rights of workers and consumers and makes it easier for individuals to fight powerful corporations, said Rep. Hank Johnson, D-Ga., the legislation’s chief sponsor.
“Forced arbitration agreements undermine our indelible Constitutional right to trial by jury, benefiting powerful businesses at the expense of American consumers and workers,” he said.
Americans with few choices in the marketplace may unknowingly cede their rights when they enter contracts to buy a home or a cellphone, place a loved one in a nursing home or start a new job, Johnson said.
A fellow Georgian, Republican Rep. Doug Collins, said that rather than end injustice, Johnson’s bill would promote it.
“What happens when everyday consumers and employees are denied rights to arbitrate - rights their (employment or consumer) contracts guarantee them?” Collins asked.
Far too often, “it means Americans will be shut out of the justice system entirely,” he said, citing the length and cost of most legal cases.
The Obama administration had moved to ban most types of mandatory arbitration clauses for banking and credit card customers, but the Republican-controlled Congress overturned the rule in 2017.
A divided Supreme Court ruled last year that non-unionized employees can be forced to use arbitration , not the courts, to air complaints about wages and overtime. Four dissenting liberal justices said the court’s 5-4 decision hits low-wage, vulnerable workers especially hard. The ruling could extend to other disputes if employee contracts specify that they must be dealt with in one-on-one arbitration.
Collins, the top Republican on the House Judiciary Committee, said arbitration provides consumers and workers a simpler, cheaper and faster path to justice than the judicial system. Many companies have streamlined arbitration processes in recent years to resolve disputes more quickly, he said.
But Rep. Jerry Nadler, D-N.Y., the Judiciary chairman, said that what once was a voluntary system for companies and individuals to resolve disputes has become “a legal nightmare for millions of consumers, employees and others who are forced into arbitration and are unable to enforce certain fundamental rights in court.”
Many companies use forced arbitration as a tool to protect themselves from consumers and workers who seek to hold them accountable for alleged wrongdoing, Nadler said. “By burying a forced arbitration clause deep in the fine print of take-it-or-leave-it consumer and employment contracts, companies can evade the court system, where plaintiffs have far greater legal protections, and hide behind a one-sided process that is tilted in their favor,” he said.
Arbitration cases often limit discovery, prohibit class actions and deny the right of appeal, while frequently requiring outcomes to stay secret, thereby allowing companies to avoid public scrutiny, Nadler said.
“For millions of consumers and employees, the pre-condition – whether they know it or not – of obtaining a basic service or product, such as a bank account, a cellphone, a credit card or even a job, is that they must agree to resolve any disputes in private arbitration,” he said.