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LABOR & EMPLOYMENT LAW — 03/06/09

Bill that would invalidate predispute arbitration agreements introduced in the House

A bill (H.R. 1020) that would amend the Federal Arbitration Act (FAA) to invalidate predispute arbitration agreements that require the arbitration of employment disputes or disputes arising under any statute intended to protect civil rights was introduced in the House of Representatives on February 12, 2009, by Representative Henry Johnson (D-Ga). The bill would also amend the FAA to ban predispute arbitration agreements that require the arbitration of consumer and franchise disputes.

"Many businesses rely on mandatory and binding predispute arbitration agreements that force consumers, employees and franchisees to settle any dispute with a company providing products or services without the benefit of a jury trial," said Johnson.

Called the Arbitration Fairness Act of 2009, the proposed bill would not apply to arbitration provisions found in collective bargaining agreements. The bill would define "employment dispute" broadly to mean a "dispute between an employer and employee arising out of the relationship of employer and employee as defined by the Fair Labor Standards Act." The validity or enforceability of an agreement to arbitrate would be determined by the court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.

"This is not an anti-business bill, but a pro-consumer bill," said Johnson. "One of our indelible rights is the right of a jury trial. Guaranteed by the Constitution, this right has been gradually ceded by citizens every day as they purchase a new cell phone, buy a home, place a loved one in a nursing home, or accept a new job. Once used as a tool for businesses to solve their disputes, arbitration agreements have found their way into employment, consumer, franchise and medical contracts."

The bill, which has 36 cosponsors, has been referred to the House Judiciary Committee. The Judiciary Committee, on which Johnson serves, held hearings on the bill in 2007 and 2008. Senator Russ Feingold (D-Wisc) introduced similar legislation in the Senate in 2007. More than 100 Representatives cosponsored the House bill when Johnson first introduced it in the 110th Congress.

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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