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Employment Law Brief: The End Of Arbitration? Congressional Effort Underway to End Mandatory Arbitration Provisions in Employment Agreements - What Employers Need to Know
By: Neil E. Duke
On July 12, 2007, Senator Russ Feingold and Representative Hank Johnson (D-Ga.) introduced a bill that would end the practice of including mandatory arbitration provisions in employment agreements. The bill, introduced as the Arbitration Fairness Act of 2007, would serve to amend the Federal Arbitration Act by making such agreements unenforceable. In a press release, Sen. Feingold expressed that, arbitration can be a fair and efficient way to handle disputes, but only when it is entered into knowingly and voluntarily by both parties.
Sen. Feingold then observed that employees often find themselves strong-armed into mandatory arbitration agreements. We need to make sure that all Americans can still have their day in court.
The Feingold-Johnson bill would also apply to other agreements and contracts, such as those made between consumers and credit card companies. Various consumer interest groups either testified before a Senate subcommittee or have otherwise lent their support to the bill (such as the Consumers Union, Public Citizen, the American Association for Justice, the Center for Responsible Lending, the National Employment Lawyers Association, the National Consumer Coalition for Nursing Home Reform and the National Consumer Law Center).
At this time, it is difficult to predict whether efforts to enact the Arbitration Fairness Act of 2007 will succeed. Historically speaking, over six years ago, congressional efforts succeeded in ending the practice of mandatory arbitration agreements between car manufacturers and car dealers. Many consumer interest groups liken the Arbitration Fairness Act of 2007 to that earlier effort. However, in recent years separate attempts to eliminate the inclusion of mandatory arbitration agreements in consumer contracts have failed. Only time will tell.
At the risk of sounding overly dramatic, if congressional efforts to eliminate mandatory arbitration clauses from employment agreements succeeds, the litigation floodgate will certainly collapse. Accordingly, it is critical for employers to assess the strengths of their current policies and agreements, to include consideration of incorporating supplemental measures to avert costly litigation (such as jury trial waiver provisions).
For an update on the status of the Arbitration Fairness Act of 2007, assistance in drafting comprehensive arbitration provisions and jury trial waivers in employment agreements, as well as other human resource issues and employment law matters, please contact Ober|Kaler's Employment Group.