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"Arbitration Fairness Act of 2007" Introduced by Lawmakers

Volume 6, Issue 6
September 18, 2007

Senator Russ Feingold and Representative Hank Johnson have introduced identical bills in the United States Senate and the House of Representatives (S. 1782 and H.R. 3010, respectively) entitled the "Arbitration Fairness Act of 2007," which if enacted, would amend the Federal Arbitration Act ("FAA") to make predispute agreements to arbitrate unenforceable.

The bills specifically mention that the Federal Arbitration Act was originally "intended to apply to disputes between commercial entities of generally similar sophistication and bargaining power." However, the bills note, the FAA now extends "to disputes between parties of greatly disparate economic power, such as consumer disputes and employment disputes." Moreover, because entire industries are adopting mandatory mediation clauses, individuals increasingly have no choice but to accept them to obtain a job, receive medical care, buy a car, open a bank account or get a credit card.
This expansion of the FAA has allowed corporations to use arbitration provisions that "strip individuals of their substantive and statutory rights, bans class actions, and force people to arbitrate their claims hundreds of miles from their homes." The bill also notes that the growth of the arbitral fora undermines the American civil justice system, which favors transparency and holds decision makers publicly accountable for their written decisions.
While transparency, the availability of written arbitration decisions and the prospect of arbitrators ignoring the law are legitimate concerns for both employers and employees, dispute resolution programs help all parties avoid the time and expense of protracted litigation. Yet, the Arbitration Fairness Act notes that the current arbitration scheme is skewed to "favor the corporate repeat players" who select the private arbitration company.
KZA will continue to follow this legislation. If passed, it will all but eliminate the efficacy of mandatory arbitration clauses in employment contracts and handbooks. To track the progress of this and other bills, visit http://www.thomas.gov/ and enter the bill number into the search engine provided.

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.