On September 20, the Forced Arbitration Injustice Repeal Act (FAIR) passed in the United States House of Representatives by a vote of 225-186. Employee and consumer advocates have been trying to ban forced arbitration agreements since 2007.
Since that time, the Supreme Court has issued a series of adverse decisions that instead expanded the way companies can use arbitration agreements.
Michael P. Kane, a partner at Denver Trial Lawyers ®, traveled to Washington, DC in May to lobby members of Congress on the FAIR Act. The legislation is a significant step in giving employees in Colorado their fundamental and constitutional right to a jury trial. It also holds corporations accountable for unfair and hostile work environments.
Below, we discuss why the FAIR Act is a huge leap forward for employee and consumer rights.
What Is Arbitration?
Arbitration is a way for parties to resolve their disputes outside of court. It can mimic a court proceeding, except that arbitration doesn’t have formal procedural rules. Instead of a judge or jury, the dispute is ultimately decided by a neutral arbitrator.
An arbitrator can be any person who the parties agree on to decide the dispute, whether they are legally trained or not. The arbitrator’s decision can be legally binding and enforceable.
Some contracts include an individual arbitration clause, where a party agrees to arbitrate alone. This means they are not allowed to join a collective action, which is sometimes harmful to their case.
How Does Arbitration Harm Employees and Consumers?
When arbitration is agreed to by both parties after a problem arises, it can be an efficient, cost-effective way of resolving a dispute.
However, many employees will sign arbitration agreements when they’re hired, along with a pile of other onboarding documents. As a result, employees give up their right to go to court long before a dispute ever happens. Along the same line, consumers often don’t know that they are agreeing to arbitration just by purchasing a product or service.
The vast majority of the time, arbitration benefits large companies. It helps them keep information from getting out, so the public never learns about potential misconduct. Additionally, arbitrators are more likely to rule in favor of the company.
Juries tend to favor employees and consumers, and companies want to make sure that the cases can’t be tried in front of a jury. Even in the rare case that an employee wins, the arbitrator will likely award much smaller damages.
Moreover, when employees and consumers must arbitrate individually, they lose their strength in numbers. In cases where the employee or consumer must pay their arbitration costs, sometimes this means that they can’t afford to bring their claim.
Essentially, forced arbitration prevents employees and consumers from exercising their constitutional right to bring their cases to court.
What Would the Fair Act Do?
The FAIR Act would ban forced arbitration for employment, consumer, antitrust, and civil rights claims. It would allow employees and consumers who signed arbitration agreements to bring their claims to court instead.
The FAIR Act would also ensure that individuals, workers, and small businesses are allowed to participate in class actions, joint actions, and collective actions. Any business that writes these clauses into its contracts would be unable to enforce them.
Of course, parties would still be allowed to make an informed decision to arbitrate after a dispute arises.
How Can the Fair Act Help Consumers in Colorado?
Right now, an estimated 60 million U.S. workers have signed contracts that contain forced arbitration clauses. This number probably includes around half of non-unionized workers in Colorado, especially in the healthcare, retail, and education fields. The FAIR Act will restore every Coloradans’ right to a jury trial.
To learn more about our work advocating for the FAIR Act, contact Denver Trial Lawyers ®.