By Samuel Shepard
Mandatory Arbitration Clauses, Class Action Waivers, and the Need to Pass the FAIR Act
Mandatory arbitration clauses and class action waivers have become a fact of life for many American employees. A mandatory arbitration clause is contractual language that a company has a worker sign requiring that worker to resolve legal disputes in private arbitration — “a quasi-legal forum with no judge, no jury, and practically no government oversight”. A class action waiver is contractual language that a company has a worker sign that forfeits that employee’s right to file any claims collectively with other similarly situated workers. These provisions effectively strip away the rights of employees to challenge their employers in court with claims alleging wage and hour violations, discrimination, sexual harassment, and more. Congress must enact the FAIR Act so that our legal system vindicates employee rights to seek justice, access our courts, and end abusive employer practices.
Historically, it was commonplace for American courts to decline legal enforcement of arbitration agreements, especially adhesive contracts (Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018)). When Congress passed the Federal Arbitration Act (FAA) in 1925, legislative history suggests that the bill was intended to “enable merchants of roughly equal bargaining power to enter into binding agreements to arbitrate commercial disputes,” not to enforce mandatory arbitration agreements and class action waivers against workers in employment contracts. Members of Congress envisioned the FAA to provide an “opportunity to enforce…an agreement to arbitrate, when voluntarily placed in the document by the parties to it”; they did not intend to enforce the law in cases “where one party sets the terms of an agreement while the other is left [to] take it or leave it.” Until recently, courts upheld this interpretation of the FAA’s history and purpose (Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395 (1967))).
However, starting in the 1980s, this all changed. In Gilmer v. Interstate/Johnson Lane Corp. (500 U. S. 20 (1991)), the Supreme Court held that the FAA requires mandatory arbitration agreements to be enforced against claims arising under the Age of Discrimination in Employment Act of 1967 (ADEA) antidiscrimination law. Later, in Circuit City Stores, Inc. v. Adams (532 U. S. 105 (2001)), the Court held that the FAA’s §1 exemption for employment contracts involving “any…class of workers engaged in foreign or interstate commerce” should be construed narrowly to only apply to employment contracts involving transportation workers.
These landmark decisions spurred a widespread use of arbitration clauses in employment contracts, and emboldened employers to challenge state common law and statute protections that historically limited the enforceability of mandatory arbitration provisions and class action waivers. In 2011, the Supreme Court effectively overturned an earlier 2005 California Supreme Court case that had found legal protections for employees and consumers against the enforcement of class action waivers (AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)). In Am. Express Co. v. Italian Colors Rest. (570 U. S. 228 (2013)), although Respondents argued that the arbitration and class action waiver provisions in their contract were unenforceable because they made effective vindication of their legal rights prohibitively expensive, the Supreme Court held that: 1) the FAA presumptively requires enforcement of contracts of adhesion; and 2) the “effective vindication rule” does not require that one’s assertion of rights be affordable or not cost-prohibitive, but rather only requires that one’s assertion of rights be not prohibited outright.
Eventually, the Supreme Court directly addressed the question of whether employment contracts that include mandatory arbitration provisions are enforceable in Epic Sys. Corp. v. Lewis. Employees argued that under the “saving clause” of the FAA, contractual language that violates the National Labor Relations Act (“NLRA”) right to engage in “other concerted activities for the purpose of collective bargaining or other mutual aid or protection” can be found unenforceable consistent with the FAA; this interpretation was adopted by the Ninth Circuit and consistent with NLRB precedent. However, the Supreme Court held that neither the “saving clause” nor the NLRA altered the legal requirement to enforce arbitration agreements prescribed by the FAA. The Court reasoned that state unconscionability defenses were not valid if they “interfer[ed] with fundamental attributes of arbitration,” such as individualized proceedings. Furthermore, the Court found that §7 of the NLRA did not guarantee employees the right to class or collective action procedures. Finally, the Court held that Chevron shouldn’t apply – based upon the NLRB’s 2012 decision – because: 1) the NLRB was interpreting the FAA, an act that the NLRB doesn’t administer; 2) the NLRB and the Solicitor General dispute the NLRA’s meaning and application; and 3) “there is no unresolved ambiguity for the Board to address.”
With arbitration clauses effectively privatizing our judicial system for many American workers, employees face information asymmetry and an imbalance of negotiating power with firms, and are therefore unable to contract under fair conditions. By implementing changes to our laws that prohibit employers from forcing employees to sign away their rights, society can improve both economic efficiency and equity within labor markets. Congress can do this by enacting the Force Arbitration Injustice Repeal (FAIR) Act. This Act, passed by the House of Representatives in September of 2019, would ban companies from requiring workers and consumers to resolve legal claims in private arbitration, and would invalidate current mandatory arbitration clauses and class action waivers that have already been signed in consumer or employee contracts.
Passage of the FAIR Act would protect over 60 million American workers who have signed contracts with mandatory arbitration clauses and class action waivers. Marginalized communities (including women and communities of color), who are the most likely to be subjected to arbitration agreements because they constitute a huge share of the labor pool in industries like education, retail, and healthcare that use mandatory arbitration agreements and class action waivers the most, would greatly benefit from the FAIR Act by gaining access to the courts to litigate sexual harassment claims, sex discrimination claims, and racial discrimination claims. Furthermore, passing the FAIR Act would reduce the bias in employment disputes against employee interests, resulting from the conflict of interest between employers and arbitrators (employers pick the arbitration firm that will hear their case, pay the cost to hire the arbitrator or panel of arbitrators, and usually have a “cozy” relationship with the arbitrators they hire). Studies have found that, because of the “repeat player effect,” arbitrators are often biased toward employers who continuously pick them to handle their cases; Professor Amsler from Indiana University Bloomington demonstrated that “workers are nearly five times less likely to win their case if the arbitrator had handled past disputes involving her employer.”
The FAIR Act has been introduced by Senator Blumenthal in the Senate chamber, and has thirty-eight co-sponsors, but lacks any Republican co-sponsors and has failed to receive any congressional action since it was initially referred to the Committee on the Judiciary. While passage remains unlikely, it is incumbent on Congress to continue fighting for the FAIR Act. Given the Supreme Court’s conservative crusade to interpret the FAA in a way that guts workers’ rights over the last forty years, it is crucial that Congress pass this bill to promote economic, labor, humanitarian, and social justice for all Americans.
Samuel Shepard graduated from Boston University School of Law in May 2020.
The Fight for LGBTQ+ Justice and the Equality Act
Throughout American history, the LGBTQ+ community has continually faced unconscionable levels of harassment, discrimination, and vitriol; Congress cannot waste another session without passing the Equality Act into law.
Discrimination against the community is pervasive; LGBTQ+ Americans have reported harm to their mental health (69%), physical well-being and safety (45%), school environment (39%), work environment (53%), and relationships with their neighbors and local communities (57%). More than half of LGBTQ+ Americans have faced discrimination by healthcare providers. In surveys, LGBTQ+ Americans admit to using vague language about relationships (42%), refusing to talk about their partner (37%), hiding affiliations to LGBTQ+ groups (15%) and avoiding discussion of LGBTQ+ issues altogether (31%) out of fears of facing harassment and other damaging bigotry. Additionally, LGBTQ+ people have often changed the way they dress (15%), changed the way they talk (15%), cut important people out of their lives (16%), and moved away from their families (17%) because of the harmful consequences of discrimination.
Furthermore, transgender Americans face a disproportionate share of violence and discrimination – even compared to other members of the LGBTQ+ community. 33% of trans Americans have been denied equal services or physically attacked when visiting a place of public accommodation (like a hotel, restaurant, or government office). 27% of trans workers have been fired, not hired, or denied a promotion because of their gender. Additionally, 25% have been refused treatment or physically assaulted by their primary physician, health clinic, or hospital due to their gender identity – despite new Affordable Care Act regulations that were written with the specific intention to prohibit such discrimination against trans Americans by federally-funded providers. Members of the trans community have reported avoiding public transportation (11%), stores and restaurants (26%), and going to the doctor (24%) for fears of facing abuse and violence.
Queer people face high rates of discrimination and violence because of state and federal inaction. In twenty-nine states, LGBTQ+ Americans can be fired from a job, evicted from their home, or denied a line of credit because their employer, landlord, or bank disapproves of their sexual orientation or gender identity. In fourteen states, there is no ban on LGBTQ+ discrimination in schools. Clear and universal legal protections for LGBTQ+ Americans are desperately needed if our country is ever going to heal the evils that have been done for generations against our vulnerable population.
Therefore, Congress must pass a bold LGBTQ+ civil rights bill – such as the Equality Act sponsored by Representative David Cicilline (D-RI). This legislation would amend the Civil Rights Act of 1964 to protect Americans from discrimination based on “sex, sexual orientation, gender identity, or pregnancy, childbirth, or a related medical condition of an individual, as well as because of sex-based stereotypes” in federal funding, education, housing, employment, credit access, jury service, and public accommodations. It covers claims based on: (1) association with another member of a protected class; or (2) a perception or belief, even if inaccurate, that someone is a member of that class. The Act would expand “public accommodations” to include “any establishment that provides a good, service, program,…health care, accounting, or legal services,” or “any…transportation service.” Furthermore, the Act prohibits denying individuals access to a “shared facility” (restroom, locker room, dressing room, etc.) in accordance with their gender identity. Finally, the bill allows the Justice Department to bring these claims in federal court, and prohibits anyone who violates the Equality Act from asserting protection under the Religious Freedom Restoration Act of 1993 (RFRA) as a valid defense to discriminating against LGBTQ+ Americans.
The Equality Act would be a crucial step forward for America. First, the bill expands protections under the Civil Rights Act of 1964 for all protected classes under the law, not just the LGBTQ+ community. For example, the bill would extend the Civil Rights Act’s current ban on discrimination based on sex to also cover public accommodations, state and local government services, and federal funding. Second, this bill would enact into federal law stronger anti-discrimination protections for the LGBTQ+ community than even the most liberal possible Supreme Court decisions could provide through Bostock v. Clayton County, Georgia (whether discrimination against an employee because of sexual orientation constitutes prohibited employment discrimination “because of . . . sex” within the meaning of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2) or R.G. & G.R. Harris Funeral Homes Inc. (whether Title VII prohibits discrimination against transgender people based on (1) their transgender status or (2) sex stereotyping under Price Waterhouse v. Hopkins) this summer.
Finally, public opinion strongly supports passage of federal LGBTQ+ protections. 79% of Democrats, 56% of Republicans, and 70% of Independents polled in 2018 supported passage of non-discrimination laws to protect members of the LGBTQ+ community. This support includes a majority in every age group – from millennials to the elderly – and even includes a majority of white evangelical Protestants, a group that typically has conservative positions on social issues. Outside of polls, there are also a number of powerful interest groups supporting passage of the Equality Act. Such groups include civil rights organizations (ACLU, Anti-Defamation League, NAACP, AARP), women’s rights groups (NOW, CLUW), corporations (Visa, Mastercard, Apple, Google, Netflix, Microsoft, Amazon, eBay, IBM, Facebook, Airbnb, Twitter, Intel, American Airlines), medical and professional organizations (AMA, APA, ABA, National PTA), unions (CWA, SEIU, AFSCME, AFT), celebrities (Karamo Brown, Nyle DiMarco, Adam Rippon, Jesse Tyler Ferguson, Taylor Swift), and religious organizations (Episcopal Church, United Methodist Church, United Church of Christ, Evangelical Lutheran Church in America, More Light Presbyterians, United Synagogue of Conservative Judaism, Muslims for Progressive Values, Hindu American Foundation, Unitarian Universalist Association).
The Equality Act is certainly not perfect. An ideal bill would attack not just de jure LGBTQ+ discrimination, but also de facto discrimination caused by implicit biases and socioeconomic disparities. Such a law dedicated to establishing LGBTQ+ justice might: 1) specifically include HIV/AIDS status as a class of protected individuals covered by the Equality Act; 2) expand federal funding for Medicaid, public health clinics, mental health coverage, and combatting youth homelessness; 3) ensure all homeless shelters and rehabilitation centers receiving federal funds are LGBTQ+ affirming; 4) bolster protections against hate crimes, gun violence, and the targeting of LGBTQ+ populations by law enforcement; 5) require all private and public insurance plans to cover HIV prevention; 6) require school districts that receive federal funds to adopt sex education programs that are comprehensive and LGBTQ+ inclusive; 7) institute codes of conduct prohibiting bullying and harassment in our public schools; and 8) prohibit LGBTQ+ conversion therapy. However, under the current limitations of today’s Congress, the Equality Act seems a good first step towards building a broader movement for LGBTQ+ justice over the next decade.
Although polling shows that most Americans do not think “religious objections should be a reason to deny service to an LGBTQ person” in business (57%), healthcare (64%) or employment (62%), a recent Reuters poll found that only 23% of Americans know that federal LGBTQ+ protections haven’t been enacted yet. Given the high popularity of the Equality Act, and the even higher need for its invaluable protections, Congress must finally pass this vital civil rights bill into law. The lives of LGBTQ+ men, women, and children across the United States are at stake.
Samuel Shepard graduated from Boston University School of Law in May 2020.
