The rampant abuse of arbitration agreements, and the injustice that these agreements have created for employees, is finally being recognized and addressed. The Forced Arbitration Injustice Repeal Act, or “FAIR Act,” was introduced to the United States House of Representatives by Representatives Hank Johnson and Richard Blumenthal on February 28, 2019. The FAIR Act would, among other things, outlaw forced arbitration clauses in employment contracts or agreements. The FAIR Act would, instead, require that the employee agree to arbitration only after the dispute has arisen in order for any arbitration agreement to be enforceable.
If passed as written, the Fair Act would not have retroactive effect as to disputes that arose prior to its passing; however, the bill would have retroactive effect in that it would apply to arbitration clauses in employment contracts that were entered into prior to the bill’s passing. In other words, if the bill passes, all disputes arising thereafter would not be subject to an arbitration clause included in an employment agreement.
The current state of arbitration across the country is a classic case of too much of a good thing. In theory, arbitration would serve as an option afforded to both parties to a dispute, with each party given the opportunity to weigh the pros and cons of that option to determine if they wished to have their dispute resolved through arbitration. In reality, however, this is not how arbitration works most of the time. In the majority of arbitrations, one party was not truly given an option and did not understand anything about the process prior to “agreeing” to have any future dispute resolved through that process. As a result, many people never get their day in court, because they unwittingly signed away their right to do so.
This sad state of affair invades many aspects of our society, but perhaps nowhere is it as prevalent and pressing a problem as in the employment sector. In recent years there has been an explosion in the use of arbitration agreements as a pre-requisite to beginning employment. So, if you want to work for a given company, you first have to sign away your right to go to court and have your case heard by a jury of your peers over any future issues that may come up during the course of your employment. This includes claims for violations of wage payment laws, discrimination, sexual harassment, and wrongful termination. In addition to securing a more favorable venue in arbitration, employers get the double benefit of keeping all of these disputes quiet by funneling them toward secret arbitration proceedings and away from public court filings.
Forced arbitration are particularly ill-suited for employment disputes involving discrimination or sexual harassment. One of the main goals of anti-discrimination laws is to effect societal change through their enforcement. By punishing wrongdoers, we also teach others how to act appropriately. By diverting discrimination and sexual harassment lawsuits to a confidential secret forum, these salutary goals go unmet. Not only does society suffer from losing an opportunity to guide individuals on appropriate behavior, but companies and corporations are excused from real punishment and thereby have no real incentive to remediate the problem. Studies have shown that plaintiffs in arbitration are far less likely to prevail than in court, and when successful recover far less than they would have recovered in court. This is why, after all, employers love arbitration. By keeping their exposure to liability down, the incentive to ensure proper behavior among a company’s employees is lessened or removed entirely.
The Fair Act may not pass. The pro-employer lobby will undoubtedly come out full in force against the Fair Act. A similar bill was introduced in 2018 and failed to be passed into law. Regardless though, it is clear that changes are coming to this unfair system. In addition to legislative change, social and cultural pressures have also led to change at one of the most influential corporations in the United States, Google. Earlier this year, Google announced that it was ending its policy of forced arbitration for all current and future employees. This move came only after months of sustained pressure from employees, activists, and the public at large. With Google now positioned as a leader in the fight against mandatory arbitration, alongside other industry giants such as Adobe and Intuit, hopefully more and more corporations follow suit and make similar changes to benefit and protect their employees.
Arbitration is an alternative option to litigating a dispute in court and in some cases might be the best choice. The biggest benefits that arbitration provide are lowered expenses and quicker resolutions. As a party to a dispute, it is up to you to decide how you want to proceed – or at least it should be up to you. For too long, we as a society have been content to allow millions of people sign away that decision at the outset of their employment. The reality is that no plaintiff employment lawyer ever prefers litigating an employment claim in arbitration as opposed to in front of a jury. Finally, we are taking steps to meaningfully give that choice back to employees.