Arbitration Fairness Act of 2017 Introduced in U.S. House and Senate

On March 7th, Minnesota Senator Al Franken introduced “The Arbitration Fairness Act of 2017” before the United States Senate.  If approved, S. 537 would amend the Federal Arbitration Act (“FAA”) to specifically exclude employment and consumer contracts that include a pre-dispute arbitration clause.  If the proposed bill is enacted, it would create a new FAA chapter addressing consumer and employment contracts titled “CHAPTER 4—Arbitration of Employment, Consumer, Antitrust, and Civil Rights Disputes.” An identical measure, H.R. 1374, was introduced to the U.S. House of Representatives by Georgia Congressman Hank Johnson.

The text of H.R. 1374 states the FAA was not intended to apply to consumer and employment disputes.  The bill also asserts that the U.S. Supreme Court has extended the FAA’s reach contrary to Congressional intent.

SEC. 2. FINDINGS.

The Congress finds the following:

(1) The Federal Arbitration Act (now enacted as chapter 1 of title 9 of the United States Code) was intended to apply to disputes between commercial entities of generally similar sophistication and bargaining power.

(2) A series of decisions by the Supreme Court of the United States has interpreted the Act so that it now extends to consumer disputes and employment disputes, contrary to the intent of Congress.

(3) Most consumers and employees have little or no meaningful choice whether to submit their claims to arbitration. Often, consumers and employees are not even aware that they have given up their rights.

(4) Mandatory arbitration undermines the development of public law because there is inadequate transparency and inadequate judicial review of arbitrators’ decisions.

(5) Arbitration can be an acceptable alternative when consent to the arbitration is truly voluntary, and occurs after the dispute arises.

As written, the Act would place the question of whether proposed FAA Chapter 4 applies to a particular dispute in the hands of the judiciary whether or not the pre-dispute arbitral agreement states otherwise.  Additionally, the law would not apply to collective bargaining agreements entered into between an employer and labor union.  Finally, the bill text states the Act’s provisions “shall take effect on the date of enactment of this Act and shall apply with respect to any dispute or claim that arises on or after such date.”  As a result, the proposed Act would not apply to the Murphy Oil case that is currently pending before the U.S. Supreme Court.

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