On September 20, 2019, the United States House of Representatives passed the Forced Arbitration Injustice Repeal Act (the “FAIR Act”), H.R. 1423, a bill seeking to eliminate mandatory arbitration agreements and class action waivers in future employment, consumer, antitrust, or civil rights disputes. The FAIR Act passed the House by a 225-186 vote, with Democrats and Republicans voting almost exclusively along party lines. If made law, the FAIR Act would amend the Federal Arbitration Act and deliver a significant blow to the longstanding public policy favoring arbitration over litigation in resolving civil disputes, thereby nullifying extensive case law governing arbitration of these types of disputes.
The FAIR Act expressly states its purposes, which are to (1) prohibit pre-dispute mandatory arbitration agreements governing consumer, employment, antitrust, and civil rights disputes; and (2) prohibit agreements and practices that interfere with the rights of individuals, workers, and small businesses to participate in joint, collective, or class actions, related to consumer, employment, antitrust, or civil rights disputes. To this end, the FAIR Act simply deems invalid and unenforceable any pre-dispute arbitration agreement or joint-action waiver that relates to employment, consumer, antitrust, or civil rights disputes.
The widespread impact of this bill, should it become law, is significant. Misuse of the act would certainly be commonplace based on such broad definitions as “consumer dispute,” which includes disputes concerning one or more individuals who seek or acquire property, services, investments, credit, or money for personal, family, or household use. A “consumer dispute” may be between this defined consumer and the provider or seller of such property, services, investments, credit, or money, or even a third party “involved” in “the selling, providing of, payment for, receipt or use of information about, or other relationship” to the property, services, investments, credit, or money.
The FAIR Act has been received by the Senate and referred to the Senate Judiciary Committee. If taken up for a vote, it is not expected to garner the simple majority needed to pass the Republican-controlled Senate. Considering the breadth of the bill, all businesses that use or intend to use mandatory arbitration agreements and/or class action waivers should stay tuned to monitor the proposed FAIR Act’s fate in the Senate.