Forced Arbitration Injustice Repeal Act
Floor Speech
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Mr. NADLER. Madam Chairwoman, I rise in strong support of H.R. 1423, the Forced Arbitration Injustice Repeal Act, or the FAIR Act.
This critical legislation would restore access to justice for millions of Americans who are currently locked out of the court system and are forced to settle their disputes against companies in a private system of arbitration that is often skewed in the company's favor over the individual.
Nearly a century ago, Congress enacted the Federal Arbitration Act to allow merchants to resolve run-of-the-mill contract disputes in a system of private arbitration that would be legally enforceable. The system that Congress envisioned was to be used voluntarily and only between merchants of equal bargaining power.
However, the Supreme Court, over the past 40 years, has issued a series of decisions that have expanded the use of arbitration far beyond Congress' original intent or a fair reading of the text of the Federal Arbitration Act, creating the unjust system that we see today.
Private arbitration has been transformed from a voluntary forum for companies to resolve commercial disputes into a legal nightmare for millions of consumers, employees, and others who are forced into arbitration and are unable to enforce certain fundamental rights in court.
Many companies use forced arbitration as a tool to protect themselves from consumers and workers who seek to hold them accountable for wrongdoing. By burying a forced arbitration clause deep in the fine print of a take-it-or-leave-it consumer or employment contract, companies can evade the court system, where plaintiffs have far greater legal protections, and hide behind the one-sided process that is tilted in their favor.
For example, arbitration generally limits discovery, does not adhere to the Rules of Civil Procedure, can prohibit class actions--which it almost always does--and denies the right of appeal. Worse yet, arbitration allows the proceedings, and often even the results, to stay secret, thereby permitting companies to avoid public scrutiny of potential misconduct, thereby enabling companies to continue unsafe practices after settling with one person.
For millions of consumers and employees, the precondition--whether they know it or not--of obtaining a basic service or product, such as a bank account, a cell phone, a credit card, or even a job, is that they must agree to resolve any disputes in private arbitration.
We used to refer to these kinds of agreements as contracts of adhesion, where one party with all the power dictates the terms to the other party in a take-it-or-leave-it contract.
The next time you apply for a credit card, try crossing out the term in the fine print requiring you to agree to arbitration and see if you still get that credit card. You will be denied without a moment's hesitation.
These are classic contracts of adhesion, which were once clearly disfavored under the law, but which now seem to have been blessed by the Supreme Court as standard operating procedures in the corporate world.
Madam Chair, the Seventh Amendment to the Constitution guarantees everyone the right to a jury trial for all controversies at law over $20. These agreements for arbitration nullify the Seventh Amendment. We have to respect the Constitution. The Constitution has more things in it than the Second Amendment. It has a few other amendments, like the Seventh Amendment, which we should respect.
These contracts of adhesion, these agreements, nullify any protections that Congress votes. If we vote or a State legislature votes on an employment protection, a union protection, a consumer protection, its enforcement can be completely nullified by these arbitration agreements.
For individuals who have no choice but to agree to these contracts, that means that their ability to enforce civil rights, consumer, labor, and antitrust laws are subject to the whims of a private arbitrator, often selected by the companies themselves. These private arbitrators are not required to provide plaintiffs any of the fundamental protections guaranteed in the courts, and their further employment can depend on building a good reputation with the companies that hire them.
Unsurprisingly, then, arbitration has become a virtual get-out-of- jail-free card that many companies use to circumvent the basic rights of consumers and workers.
H.R. 1423, the FAIR Act, reverse this disastrous trend by prohibiting arbitration clauses in consumer, labor, antitrust, and civil rights disputes.
Importantly, this legislation does not preclude parties from agreeing to arbitrate a claim after the dispute arises, which will ensure that arbitration agreements are truly voluntary and transparent. It does, however, prevent unsuspecting consumers and employees from being forced to give up their right to seek justice in court.
I urge my colleagues to support this vital legislation, and I reserve the balance of my time.
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Mr. NADLER. Mr. Chair, I yield 2 minutes to the distinguished gentlewoman from Illinois (Mrs. Bustos).
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Mr. NADLER. Mr. Chairman, I yield 1 minute to the distinguished gentleman from Virginia (Mr. Beyer).
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Mr. NADLER. Mr. Chairman, I yield 1 minute to the distinguished gentlewoman from Colorado (Ms. DeGette).
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Mr. NADLER. Mr. Chairman, I yield 1 minute to the distinguished gentleman from New York (Mr. Jeffries).
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Mr. NADLER. Mr. Chair, I yield myself the balance of my time.
Mr. Chair, we have a bedrock principle in this country, and that is that all Americans deserve their day in court. We make a mockery of this principle, however, when individuals can be stripped of this fundamental right and be forced into private arbitration proceedings without the safeguards our judicial system affords.
We make a mockery of this right not only when individuals can be stripped of this right, but when almost all Americans are stripped of this fundamental right and are forced into private arbitration proceedings without the safeguards our judicial system affords.
Now, we heard the statistics cited by the gentleman, which come from the Chamber of Commerce, and Mr. Cicilline showed how wrong those statistics were.
But the real point is, of course, that, under this bill, if a plaintiff thinks that he can get a better deal under arbitration, then arbitration is available voluntarily, as it should be.
What this bill seeks to ban is individuals--almost all Americans-- involuntarily giving up their sacred constitutional right to a trial by jury, to their day in court, whether they like it or not. This bill will guarantee that people have their rights. They can opt for arbitration if they want to, but they don't have to.
This bill supports liberty; it supports constitutional rights; and it supports the little guy against the giant corporation. H.R. 1423, the FAIR Act, rights these wrongs by reopening the courthouse door to all Americans.
I applaud the gentleman from Georgia (Mr. Johnson) for his leadership on this legislation which has 222 cosponsors.
This measure is also supported by a broad coalition of more than 70 public-interest, labor, and advocacy organizations, including Public Citizen, Consumer Reports, the Communications Workers of America, the Leadership Conference on Civil Rights, and the American Association of Justice, not just by trial lawyers.
In addition, 84 percent of Americans across the political spectrum support ending forced arbitration in employment and consumer disputes, according to recent polling data.
Mr. Chairman, it is up to Congress to end this secretive and unfair practice. I urge my colleagues to support the FAIR Act and to restore access to justice for millions of Americans, and I yield back the balance of my time.
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Mr. NADLER. Mr. Chair, I claim the time in opposition to the amendment.
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Mr. NADLER. Mr. Chair, I rise in strong opposition to this amendment.
There are more than 60 million workers who make up a majority of nonunion, private sector employees and who are subject to forced arbitration clauses. These employees are told that, if they want to get a job or keep the job they have, they must sign away their right to their day in court and submit to forced arbitration. These workers have absolutely no choice.
Many of these workers have no idea that they are subject to forced arbitration, and even if they are aware, there is nothing they can do about it; and, of course, it is not possible for them to know that they may be victims of sexual assault, wage discrimination, or other illegal behavior before they begin employment.
This is a serious power imbalance which allows companies to unilaterally impose unfair terms upon nonunion employees. The FAIR Act aims to put power back into the hands of these 60 million workers who have been forced by their employer to sign away their rights.
But when real choice is part of the equation, arbitration can be a reasonable alternative to litigation. Collective bargaining, which involves meaningful negotiation between the company and the union, results in a much different arbitration process and can produce much different results.
In a 2019 report, the Economic Policy Institute noted that ``beyond the use of the world `arbitration,' the system that organized labor and management have long been using to resolve disputes has almost nothing in common with the top-down, take-it-or-leave-it brand of arbitration.''
The collective bargaining process provides protections that are simply unavailable to many nonunion workers, such as the ability to reject unfair employment terms. In collective bargaining, the company cannot just impose its will upon the union. There must be buy-in on both sides.
When arbitration is agreed to through collective bargaining, there is less likely to be an experience gap between the parties. In nonunion arbitration, the company continuously interacts with arbitrators, while the employee may only see the arbitrator once, if that. And in most cases, the company gives itself unilateral power to pick the arbitrator. This creates a conflict of interest in which the arbitrator has a strong incentive to prioritize the company's interest by finding in its favor than to fairly assess the claim at issue.
The collective bargaining process looks much different. Like the company, the union also has the benefit of being a repeat player in arbitration. The union understands how the process works, and it may even have experience practicing in front of the same arbitrator multiple times.
When the repeat player dynamic exists on both sides of the arbitration, the risk that one party will be systematically favored over the other is greatly reduced.
Furthermore, through collective bargaining, a union can secure a variety of important protections for workers, such as requiring truly neutral arbitrators, paid time off for employees to participate in the arbitration, and transparent decisionmaking.
Often, union employees are guaranteed a multilevel appeals process, lowering the risk that an arbitrator will ignore relevant laws or that there will be an unjust result.
The concerns that the FAIR Act is designed to address simply do not occur in the context of collective bargaining and, therefore, makes no sense to apply its restrictions to such contracts.
Accordingly, I strongly oppose this amendment, and I encourage my colleagues to vote against this amendment.
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Mr. NADLER. Mr. Chair, I yield myself the balance of my time.
If anything, this discussion about collective bargaining shows that arbitration can be a fair and reasonable process when there is actual choice on both sides of the tracks. But for the majority, the overwhelming majority of nonunion private sector workers, that choice simply does not exist.
This amendment fails to comprehend these critical distinctions between collective bargaining and the take-it-or-leave-it arbitration clauses that the majority of workers face. And it fails to recognize that restoring equity and choice is exactly what the FAIR Act claims to do. You cannot compare apples and oranges, as the gentleman from Ohio (Mr. Jordan) tried to do.
Finally, as the AFL-CIO explains, this amendment, ``would also be directly contrary to the intent of Congress in both the Wagner and Taft-Hartley Acts, which encourage the practice of collective bargaining and the resolution of contract disputes through arbitration.''
And, again, arbitration voluntarily agreed to by the workers through their democratically elected union is not the same as coercive forced arbitration.
Mr. Chair, accordingly, I urge my colleagues to oppose the amendment, and I yield back the balance of my time.
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