US House Passes FAIR Act to End Mandatory Workplace Dispute Arbitration | McAfee and Taft

0

For decades, American employers have relied on court precedent and federal arbitration law to enforce pre-dispute arbitration agreements. A “pre-dispute arbitration agreement” is a binding arbitration agreement signed before there is a known dispute between employer and employee that requires the parties to arbitrate any future labor dispute. These are usually concluded by the employer and the employee at the start of the employment relationship. Pre-litigation arbitration agreements often contain provisions whereby the employee waives his or her right to bring a class or collective action against the employer. Such agreements have been essential weapons in an employer’s arsenal to limit the costs and risks associated with class/class actions.

There has been a growing movement to limit, or outright eliminate, an employer’s ability to enforce pre-dispute arbitration agreements and class action waivers. On March 17, 2022, the United States House of Representatives took another step toward that goal. In a vote of 222 to 209, the House passed the “Forced Arbitration Injustice Repeal Act of 2022,” commonly referred to as the “FAIR Act.”

Repeal of Unfairness in Compulsory Arbitration Act of 2022

The stated purpose of the FAIR Act is twofold: (1) to prohibit pre-dispute arbitration agreements that mandate arbitration of future labor disputes, and (2) to prohibit agreements that interfere with the right of a employee to participate in class or collective actions. related to their job. The law further states that any agreement contrary to these purposes would be invalid and unenforceable. In particular, the Act does not prohibit an employer and an employee from agreeing to arbitration after a dispute has arisen, although employees are often reluctant to enter into arbitration agreements after a dispute has arisen.

If it were to become law, the FAIR Act would dramatically change the landscape of employment disputes, particularly disputes over minimum wage and overtime pay brought under the Fair Labor Standards Act. In a FLSA class action, an employee sues on behalf of herself and all others in a similar situation. If a court conditionally certifies a class (technically called a “class” in the FLSA cases), written notice will be sent to all similarly situated persons giving them the opportunity to join the litigation. As one can imagine, litigation costs and potential exposure to liability increase significantly with conditional certification of a group. Employers are often able to reduce these costs by requiring employees to arbitrate these claims individually under the terms of a pre-dispute agreement. If the FAIR Act becomes law, employers will no longer be able to rely on pre-litigation agreements to reduce these costs and risks.

The FAIR Act now passes the Senate

“The future of the FAIR Act, and whether it will eventually become law, is far from certain. The House passed the law largely on partisan lines – all but one of the 222 votes in favor of the FAIR Act were cast by Democrats, and all 209 votes against the law were cast by Republicans. The current composition of the Senate is 50 Republicans, 48 ​​Democrats and 2 independents who caucus with Democrats. It is unclear whether the Senate will vote along party lines as the House did.

Nevertheless, employers should keep an eye on the future of the FAIR Act as well as the growing legislative trend to limit the enforceability of arbitration agreements.

Share.

Comments are closed.