Fact Sheet - The Arbitration Fairness Act of 2007
When Congress enacted the
Federal Arbitration Act (“FAA”), its goal was to allow an
alternative forum for parties on equal footing to resolve
their disputes. Yet a series of court decisions moved the
law away from its original intent and opened the door for
arbitration to be used to deprive ordinary citizens in employment,
consumer, and franchise disputes of their constitutional right
to use the civil justice system.
A large and growing number of corporations now require millions
of consumers and employees to sign contracts that include
mandatory arbitration clauses. Most of these individuals have
little or no meaningful opportunity to negotiate the terms
of their contracts and so find themselves having to choose
either to accept a mandatory arbitration clause or to forgo
securing employment or needed goods and services. Incredibly,
mandatory arbitration clauses also apply when individuals
are trying to vindicate their civil rights under statutes
specifically passed by Congress to protect them.
Although arbitration can be a fair and efficient way to resolve
a dispute when both parties choose it after the dispute arises,
there are a range of ways in which arbitration can be particularly
hostile to individuals attempting to assert their rights.
For example, high administrative fees, a lack of discovery
proceedings and other civil due process protections, and no
meaningful judicial review of arbitrators’ decisions can all
act as barriers to the fair and just resolution of an individual’s
claim. When arbitration is required rather than voluntarily
chosen, the likelihood that these problems will occur and
that arbitrators will favor repeat corporate players over
individual claimants is increased.
Although some states have tried to address this problem through
consumer protection laws, courts have interpreted the FAA
as trumping those state laws. In the current legal environment,
consumers and employees have little recourse when faced with
a mandatory arbitration system that is tilted in favor of
large corporate interests. Contrary to the intent of the FAA,
ordinary citizens are being forced into arbitration against
their wishes.
The Arbitration Fairness Act of 2007, which I introduced in
the Senate and Rep. Hank Johnson (D-GA) introduced in the
House, reflects the FAA’s original intent by requiring that
agreements to arbitrate employment, consumer, franchise, or
civil rights disputes be made after the dispute has arisen.
The Act does not prohibit arbitration, but it will prevent
a party with greater bargaining power from forcing individuals
into arbitration through a contractual provision. It will
ensure that citizens have a true choice between arbitration
and the traditional civil court system. The Act does not apply
to collective bargaining agreements.
A coalition of consumer and employment
rights groups supports the measure. Included in the coalition
are Consumers Union, Consumer Federation of American, Public
Citizen, National Consumer Coalition for Nursing Home Reform,
American Association for Justice, National Employment Lawyers
Association, and National Association of Consumer Advocates.
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