On Oct. 30, 2018, Rep. Jerrold Nadler, D-N.Y., and Rep. Bobby Scott, D-Va., together with 58 Democratic cosponsors, introduced the Restoring Justice for Workers Act, H.R. 7109. Unlike some earlier bills, this proposed legislation would prohibit all pre-dispute arbitration agreements covering employment claims, forbid retaliation against employees for refusing to arbitrate those disputes and amend the National Labor Relations Act (NLRA) to forbid agreements that restrict employees' right to collectively litigate employment claims.
The new bill also gives protections to ensure that post-dispute arbitration agreements are not coerced and that the voluntary consent of employees has been given. A similar bill is expected to be introduced in the Senate by Sen. Patty Murray, D-Wash.
The bill is designed to and would effectively reverse the Supreme Court's May 21 Epic Systems v. Lewis opinion, 138 S. Ct. 1612 (2018), which held that arbitration agreements with class action waivers must be enforced as written despite the NLRA. (We addressed that ruling in a May 21, 2018, blog article.)
The findings in the latest bill target the Supreme Court's interpretation and application of the Federal Arbitration Act (FAA). They assert that the FAA "was intended to apply to disputes between commercial entities of generally similar sophistication and bargaining power." But despite this "intent," the bill maintains that the Supreme Court "has interpreted the [FAA] so that it now extends to employment disputes." And despite the plain language of the NLRA, the court in Epic Systems held "that employees may be forced, as a condition of employment, to waive their right to collectively litigate employment action." (H.R. 7109 bill at p. 2-3).
The almost 12-page bill intends to keep federal law and the judiciary rather than arbitrator in the decision-making process. Under the "Applicability" heading, it declares:
[W]hether this chapter applies to an arbitration agreement shall be determined under Federal law. The applicability of this chapter to an agreement to arbitrate and the validity and enforceability of an agreement to which this chapter applies shall be determined by a court, rather than an arbitrator, regardless of whether any contractual provision delegates such matters to the arbitrator and irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement. (H.R. 7109 bill at p. 8.) (Emphasis added.)
Plainly, the bill seeks to avoid having any of the coverage issues delegated to an arbitrator for resolution.
While this bill currently has little chance of passage given the current congressional makeup, it does foretell the Democrats' future agenda should control in the House shift.
Prior anti-arbitration bills and legislation
The bill's drafters were not writing on a blank slate. As far back as 2009, then-Sen. Al Franken introduced and then reintroduced the Arbitration Fairness Act. In May 2011 we blogged Franken's 2011 iteration of the bill, which proved unsuccessful, but the senator did succeed with legislation known as the "Franken Amendment" to the Department of Defense Appropriation Act of 2010, which generally prohibits defense contractors from requiring arbitration of Title VII claims or tort claims involving or relating to sexual assault or harassment.
More recently, a bipartisan bill stemming from the #MeToo movement was introduced in December 2017. Our Dec. 8, 2017, blog article covered that bill, known as the "Ending Forced Arbitration of Sexual Harassment Act," which would prevent employers from using arbitration as a means to resolve "sex discrimination disputes." On Dec. 6, 2017, Sen. Kirsten Gillibrand, D-N.Y., and Rep. Cheri Bustos, D-Ill., introduced that bill. Republican cosponsors of the 2017 bill included Sen. Lindsay Graham, R-S.C., and Reps. Walter Jones, R-N.C., and Elise Stefanik, R-N.Y.
While targeting sexual harassment claims, its exceedingly broad language could have a far broader impact, perhaps unintentional, and could preclude all employment-related arbitration. The new Oct. 30 bill is clearly intended to do just that.
The future of arbitration post-Epic Systems
Opposition to individual arbitration agreements for employment claims has continued growing after Epic Systems. Vocal anti-arbitration sentiment has existed in the media and among some academics at least since 2015. The #MeToo movement led to the bipartisan bill and caused some companies to abandon arbitration for sexual harassment claims. Several states passed laws that barred mandatory arbitration of sexual harassment claims, including Washington, Maryland and New York. However, those laws are subject to FAA pre-emption and likely will have limited impact on most arbitrations. Indeed, the New York statute states that it applies "except where inconsistent with federal law."
Most employers still value individual arbitration agreements that curtail the massive expense of class and collective actions, regardless of merit. The relative speed and modest cost of arbitration remains attractive to those companies that have long been frustrated by the years spent in court cases with little reward, regardless of who ultimately wins.
The Bottom Line:
No one can predict the ultimate success of the Restoring Justice for Workers Act, but challenges to individual arbitration of employment claims will continue.
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