The U.S. House of Representatives has approved a bill that would prohibit employers from enforcing arbitration agreements that workers sign before disputes arise. However, the Democrat-backed measure may face resistance in the Senate because Republican lawmakers have raised concerns about the bill's reach.
The action comes on the heels of a new law banning such agreements for sexual-harassment claims, but the proposed legislation is much more expansive.
The Forced Arbitration Injustice Repeal (FAIR) Act, H.R. 963, passed the House in a 222 to 209 vote on March 17. The proposed legislation would broadly ban employers and workers from agreeing in advance to have legal claims decided by a neutral third party—an arbitrator—rather than a court.
Notably, the Senate declined to pass the bill in 2019, and many business groups, including the Society for Human Resource Management (SHRM), oppose H.R. 963.
If enacted, the FAIR Act would invalidate pre-dispute arbitration agreements and joint-action waivers for employment, consumer, antitrust and civil rights disputes.
If the FAIR Act is ultimately signed into law, it would take effect immediately and "apply with respect to any dispute or claim that arises or accrues on or after such date," according to the bill. The law would not apply to arbitration provisions in collective bargaining agreements between employers and labor unions.
Employers should note that the new law banning pre-dispute agreements to arbitrate sexual-harassment claims, H.R. 4445, already took effect.
For now, federal law does not ban pre-dispute arbitration agreements for other types of employment-related claims.
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