On July 15, 2008, the Arbitration Fairness Act of 2007, H.R. 3010 (the “Act”), which was originally introduced on July 12, 2007, was approved by the House of Representatives Subcommittee on Commercial and Administrative Law. The Act would invalidate any predispute arbitration agreement for “an employment, consumer, or franchise dispute” or “a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.”
The Act was introduced because the Federal Arbitration Act, which was originally intended as a means for resolving disputes between commercial entities with “similar sophistication and bargaining power,” now allows parties with great advantages in bargaining power to force consumers and employees to resolve disputes through mandatory arbitration. Such mandatory provisions are often encountered by individuals seeking employment, medical care, to buy a car, to open a bank account or to apply for a credit card. The sponsors of the Act contend that in these situations, individuals are deprived of “their right to have disputes resolved by a judge or jury” as they have no choice but to agree to the inclusion of the provision in the contract or forgo the job, good or service. The sponsors also contend that the lack of transparency of arbitrator rulings acts as a “poor system for protecting civil rights and consumer rights."
The Act will now be reviewed by the House Committee on the Judiciary and, if approved, will head to the House floor for a full hearing and vote. An identical bill, S. 1782, is currently being reviewed by the Senate’s Judiciary Subcommittee on the Constitution, however no action has been taken since December 12, 2007.