Keep an Eye on These Bills If You Use or Are Considering Using a Mandatory Arbitration Provision

As you know, several pieces of federal legislation aimed at limiting or eliminating altogether mandatory arbitration in the employment setting have been proposed, and failed in the past several years. In fact, several states: California, New Jersey and New York, have all passed state laws prohibiting mandatory arbitration of employment disputes. The Biden administration is going to make another run at passing this legislation at the federal level, and employers should stay abreast of  the progress of these Bills.

Two of the more comprehensive and high-profile Bills filed to date are the FAIR Act and the PRO Act.

Forced Arbitration Injustice Repeal (FAIR) Act (H.R. 963).

The FAIR Act was reintroduced in February of this year. In 2019 the Bill passed the Congress but failed to clear the Senate. The current FAIR Act has 155 cosponsors in the House. If it passes, the FAIR Act will preclude mandatory arbitration agreements for disputes involving, among other things, civil rights and employment. It will also prohibit all class and collective action waivers. You may recall that I have suggested in past updates that class and collection action waivers were two of the most beneficial aspects of mandatory employment arbitration agreements.

Protecting the Right to Organize Act (PRO Act) (H.R. 842). 

The PRO Act was also introduced in the Congress in February of this year. The PRO Act is even more pro-union and pro-employee than the FAIR Act. For example, the PRO Act would legislatively overturn the Supreme Court’s decision in Epic Systems and would make it an unfair labor practice for any employer to use class action waivers.

The PRO Act is expected to be opposed by virtually all Republicans; accordingly, its passage hinges on certain Democratic senators and whether the Senate retains the filibuster. In contrast, the FAIR Act is likely to receive some bipartisan support. Not only did the prior version of the FAIR Act receive some bipartisan support in the House, but some Republican senators may also support the bill-or at least a watered down version of it. For example, Senator Lindsay Graham (R-SC) has supported limiting mandatory arbitration agreements under the right circumstances. As drafted, the FAIR Act is unlikely to garner sufficient votes in the Senate to overcome a filibuster, but a compromise bill might.

Takeaways Ongoing state and federal activity demonstrates a concerted effort to limit the use of arbitration agreements and class waivers in the employment context. Unlike in recent years, the composition of Congress is more likely to allow for the passage of such Bills.  As such, employers with arbitration programs, and those contemplating implementing such programs, should continue to monitor events in Washington.

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