Requiring an employee or consumer to submit any dispute to binding arbitration as a condition of employment or purchase of a product or service is commonly referred to as “forced arbitration.” Many times, the employee or consumer is required to waive their right to sue or to participate in a class action lawsuit. Critics argue that these arbitration agreements disempower the middle class and some in Congress have taken notice.
Last Thursday, Congressman Jerrold Nadler (D-N.Y.) and Sen. Richard Blumenthal (D-Conn.) announced a package of bills at a press conference that could end the practice of forced arbitration.
“One of the systems that is truly rigged against consumers and workers and the American people is our current system of forced arbitration,” Blumenthal said while introducing the Forced Arbitration Injustice Repeal Act. Under the bill, companies would no longer be able to enforce arbitration agreements in consumer, employment, civil rights, or antitrust disputes. The Democrats also introduced the Ending Forced Arbitration of Sexual Harassment Act which would eliminate arbitration in disputes that involve sexual harassment.
According to Nadler, the goal of these proposals is to help workers and consumers obtain justice. “All Americans deserve their day in court,” Nadler said. “We make a mockery of this principle when we allow individuals to be forced to take their claims to private arbitration.”
These lawmakers aim to reverse the Supreme Court’s ruling in Epic Systems Corp. v. Lewis – that employers may require employees to settle collective disputes in individual arbitration, thereby barring them from banding together in class-action lawsuits against employers. Justice Neil Gorsuch wrote the decision for the majority. The ruling was a contentious 5-4 decision along party lines.
Blumenthal believes that the bills will pass because Democrats have a majority in the House of Representatives. However, it is unclear whether these bills are dead-on-arrival in the Republican-controlled Senate. Furthermore, it appears unlikely that President Trump will sign a bill reversing the decision written by his first nomination to the Supreme Court. Therefore, it appears that, notwithstanding the present legislation, the enforceability of arbitration provisions is here to stay for the time being.
Troutman Sanders will continue to monitor and report on important developments involving the changing landscape of arbitration.