Federal Bill Reintroduced to End Mandatory Arbitration of Employment Disputes
On July 29, 2021, U.S. House Democrats reintroduced the Restoring Justice For Workers Act, which would ban pre-dispute mandatory arbitration clauses in employment matters. The goal of this bill is to reverse the U.S. Supreme Court's 2018 decision in Epic Systems v. Lewis, which upheld the enforceability of mandatory arbitration clauses.
Mandatory arbitration agreements are often a condition of employment, and can be buried in employment-related agreements that new employees are required to sign as a condition of employment. These clauses have the chilling effect of preventing workers from bringing employment discrimination, wage, sexual harassment, class actions, and other claims in court. Instead, employees have to agree to pay to have their claims resolved by an arbitrator, or “private judge.”
Arbitrators are usually lawyers who previously represented companies/employers, or are retired judges. Arbitrators are very highly compensated: paying $1,000/hour to an arbitrator would not be unusual. Because the structural incentives of arbitration are greatly in favor or employers, arbitration awards often result in less favorable, or no financial, awards to employees. Arbitrators rely on repeat business from the employers, thus creating a critical conflict of interest: If arbitrators want to maintain their business relationship with a given company, it’s in their interest to rule in that company’s favor, or they risk not being selected again for this highly-lucrative work.
We hope to see this bill pass and prevent forced pre-dispute arbitration of employment disputes. The bill would allow employees and employers to voluntarily enter into an agreement to arbitrate after a dispute has already arisen (a post-dispute arbitration agreement), as long as the employee is informed in writing of their rights.