{"id":1160,"date":"2020-05-19T15:35:10","date_gmt":"2020-05-19T19:35:10","guid":{"rendered":"https:\/\/sites.bu.edu\/dome\/?p=1160"},"modified":"2020-05-19T15:35:10","modified_gmt":"2020-05-19T19:35:10","slug":"mandatory-arbitration-clauses-class-action-waivers-and-the-need-to-pass-the-fair-act","status":"publish","type":"post","link":"https:\/\/sites.bu.edu\/dome\/2020\/05\/19\/mandatory-arbitration-clauses-class-action-waivers-and-the-need-to-pass-the-fair-act\/","title":{"rendered":"Mandatory Arbitration Clauses, Class Action Waivers, and the Need to Pass the FAIR Act"},"content":{"rendered":"

Mandatory arbitration clauses and class action waivers have become a fact of life for many American employees.\u00a0 <\/span>A mandatory arbitration clause<\/span><\/a> is contractual language that a company has a worker sign requiring that worker to resolve legal disputes in private arbitration \u2014 \u201ca quasi-legal forum with no judge, no jury, and practically no government oversight\u201d.\u00a0 A class action waiver<\/span><\/a> is contractual language that a company has a worker sign that forfeits that employee\u2019s right to file any claims collectively with other similarly situated workers.\u00a0 <\/span>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.\u00a0 <\/span>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.\"\"<\/a><\/span><\/p>\n

Historically, it was commonplace for American courts to decline legal enforcement of arbitration agreements, especially adhesive contracts (Epic Sys. Corp. v. Lewis<\/i>, 138 S. Ct. 1612 (2018)).\u00a0 <\/span>When Congress passed the Federal Arbitration Act (FAA) in 1925, legislative history suggests that the bill was intended to \u201cenable merchants of roughly equal bargaining power to enter into binding agreements to arbitrate commercial<\/i><\/b> <\/i>disputes,\u201d not to enforce mandatory arbitration agreements and class action waivers against workers in employment contracts.\u00a0 <\/span>Members of Congress envisioned the FAA to provide an \u201copportunity to enforce\u2026an agreement to arbitrate, when voluntarily placed in the document by the parties to it<\/i><\/b>\u201d; they did not intend to enforce the law in cases \u201cwhere one party sets the terms of an agreement while the other is left [to] take it or leave it.\u201d\u00a0 <\/span>Until recently, courts upheld this interpretation of the FAA\u2019s history and purpose (Prima Paint Corp. v. Flood & Conklin Mfg. Co.<\/i>, 388 U. S. 395 (1967))).<\/span><\/p>\n

However, starting in the 1980s, this all changed.\u00a0 <\/span>In Gilmer <\/i>v. Interstate\/Johnson Lane Corp.<\/i> (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.\u00a0 <\/span>Later, in Circuit City Stores, Inc. <\/i>v. Adams <\/i>(532 U. S. 105 (2001)), the Court held that the FAA\u2019s \u00a71 exemption for employment contracts involving \u201cany…class of workers engaged in foreign or interstate commerce\u201d should be construed narrowly to only apply to employment contracts involving transportation workers.\u00a0<\/span><\/p>\n

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.\u00a0 <\/span>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<\/i>, 563 U.S. 333 (2011)).\u00a0 <\/span>In Am. Express Co. v. Italian Colors Rest.<\/i> (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 \u201ceffective vindication rule\u201d does not require that one\u2019s assertion of rights be affordable or not cost-prohibitive, but rather only requires that one\u2019s assertion of rights be not prohibited outright<\/i><\/b>.<\/span><\/p>\n

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<\/i>.\u00a0 <\/span>Employees argued that under the \u201csaving clause\u201d of the FAA, contractual language that violates the National Labor Relations Act (\u201cNLRA\u201d) right to engage in \u201cother concerted activities for the purpose of collective bargaining or other mutual aid or protection\u201d can be found unenforceable consistent with the FAA; this interpretation was adopted by the Ninth Circuit and consistent with NLRB precedent.\u00a0 <\/span>However, the Supreme Court held that neither the \u201csaving clause\u201d nor the NLRA altered the legal requirement to enforce arbitration agreements prescribed by the FAA.\u00a0 <\/span>The Court reasoned that state unconscionability defenses were not valid if they \u201cinterfer[ed] with fundamental attributes of arbitration,\u201d such as individualized proceedings.\u00a0 <\/span>Furthermore, the Court found that \u00a77 of the NLRA did not guarantee employees the right to class or collective action procedures.\u00a0 <\/span>Finally, the Court held that Chevron<\/i> shouldn\u2019t apply \u2013 based upon the NLRB\u2019s 2012 decision \u2013 because: 1) the NLRB was interpreting the FAA, an act that the NLRB doesn\u2019t administer; 2) the NLRB and the Solicitor General dispute the NLRA\u2019s meaning and application; and 3) \u201cthere is no unresolved ambiguity for the Board to address.\u201d<\/span><\/p>\n

\"\"<\/a>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.\u00a0 <\/span>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.\u00a0 <\/span>Congress can do this by enacting the Force Arbitration Injustice Repeal (FAIR) Act<\/span><\/a>.\u00a0 <\/span>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.<\/span><\/p>\n

Passage of the FAIR Act would protect over 60 million American workers who have signed contracts with mandatory arbitration clauses and class action waivers.\u00a0 <\/span>Marginalized communities (including women and communities of color<\/span><\/a>), 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<\/span><\/a>.\u00a0 <\/span>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 \u201ccozy\u201d relationship with the arbitrators they hire).\u00a0 <\/span>Studies have found that, because of the \u201crepeat player effect,\u201d arbitrators are often biased toward employers who continuously pick them to handle their cases; Professor Amsler<\/span><\/a> from Indiana University Bloomington <\/b>demonstrated that \u201cworkers are nearly five times less likely to win their case if the arbitrator had handled past disputes involving her employer.\u201d<\/span><\/p>\n

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<\/span><\/a> and has failed to receive any congressional action since it was initially referred to the Committee on the Judiciary.\u00a0 <\/span>While passage remains unlikely, it is incumbent on Congress to continue fighting for the FAIR Act.\u00a0 <\/span>Given the Supreme Court\u2019s conservative crusade to interpret the FAA in a way that guts workers\u2019 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.<\/span><\/p>\n

\"\"<\/a>Samuel Shepard<\/strong> graduated from Boston University School of Law in May 2020.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Mandatory arbitration clauses and class action waivers have become a fact of life for many American employees.\u00a0 A mandatory arbitration clause is contractual language that a company has a worker sign requiring that worker to resolve legal disputes in private arbitration \u2014 \u201ca quasi-legal forum with no judge, no jury, and practically no government oversight\u201d.\u00a0 […]<\/p>\n","protected":false},"author":17860,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[10,4,6],"tags":[355,109,224,108,19,358,354,357,359,360,361,356],"_links":{"self":[{"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/posts\/1160"}],"collection":[{"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/users\/17860"}],"replies":[{"embeddable":true,"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/comments?post=1160"}],"version-history":[{"count":4,"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/posts\/1160\/revisions"}],"predecessor-version":[{"id":1166,"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/posts\/1160\/revisions\/1166"}],"wp:attachment":[{"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/media?parent=1160"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/categories?post=1160"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sites.bu.edu\/dome\/wp-json\/wp\/v2\/tags?post=1160"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}