From JDSupra, Robert Gilmore and Hannah Kraus discuss the House’s passage of a bill that would prohibit mandatory arbitration agreements that included class action waivers for employment claims. This would substantially increase the risk to companies who engage with independent contractors. Disgruntled independent contractors would be able to file class action lawsuits alleging that they were misclassified. Robert and Hannah write:
U.S. HOUSE PASSES THE FAIR ACT
On March 17, 2022, the United States House of Representatives passed the Forced Arbitration Injustice Repeal Act (FAIR Act), which prohibits all pre-dispute mandatory arbitration provisions in certain contexts, including in class actions. The FAIR Act is an expansion of the recent Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, barring enforcement of mandatory arbitration provisions in workplace sexual harassment and assault claims, signed into law by President Biden earlier this month.
The FAIR Act specifically prohibits pre-dispute mandatory arbitration agreements as follows:
- Employment Disputes: Employment disputes are disputes that arise out of or relate to the work relationship or prospective work relationship between the parties. This includes disputes regarding discipline and/or termination of employment and terms of or payment for advertising, recruiting, referrals and arrangements, regardless of whether the individual is classified as an employee or independent contractor. The FAIR Act does not apply to collective bargaining agreements.
- Consumer Disputes: Consumer disputes are those arising between a consumer and a seller, including claims by a third-party involved in the transaction.
- Antitrust Disputes: Antitrust disputes arise from alleged violations of federal or state antitrust laws.
- Civil Rights Disputes: Civil rights disputes are those arising from an alleged violation of the United States Constitution, any state constitution, or any federal, state, or local law prohibiting discrimination on the basis of a legally protected status. This also encompasses employment discrimination claims.
WILL THE FAIR ACT RECEIVE BIPARTISAN SUPPORT IN THE U.S. SENATE?
The fate of the FAIR Act remains in the Senate’s hands. While the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act received overwhelming bipartisan support in both the House and the Senate, it is unclear whether the FAIR Act will receive similar treatment in the Senate given its much broader scope. Supporters of the FAIR Act, including the White House, believe that it would provide the same fairness to workers and consumers as the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act provides for sexual harassment and assault claims, but opponents argue that the FAIR Act merely deprives workers and consumers of a faster and cheaper alternative to litigation.
If passed by the Senate and signed into law by President Biden, the FAIR Act would only apply to disputes arising after its effective date and would not prohibit voluntary arbitration agreements after a dispute arises.
KJK will continue to closely monitor the status of the FAIR Act.