Forced Arbitration Injustice Repeal Act of 2022

Floor Speech

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Mr. NADLER. Madam Speaker, pursuant to House Resolution 979, I call up the bill (H.R. 963) to amend title 9 of the United States Code with respect to arbitration, and ask for its immediate consideration in the House.

The Clerk read the title of the bill.

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Mr. NADLER. 963.

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Mr. NADLER. Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, H.R. 963, the Forced Arbitration Injustice Repeal Act, or the FAIR Act, is critical legislation that 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.

Private arbitration has been transformed, by 40 years of reckless Supreme Court decisions, 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.

By burying a forced arbitration clause deep in the fine print of take-it-or-leave-it consumer and employment contracts, companies can evade the court system, where plaintiffs have far greater legal protections, and hide wrongdoing behind a one-sided process that is tilted in their favor.

For example, arbitration generally limits discovery; does not adhere to the Federal Rules of Civil Procedure; can prohibit class actions, which it almost always does; and deny 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.

For millions of workers and consumers, 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 sign a nonnegotiable contract that includes a provision requiring all disputes to be resolved in private arbitration.

These take-it-or-leave-it contracts, which were once clearly disfavored under the law, now seem to have been blessed by the Supreme Court as standard operating procedure in the corporate world.

That means for millions of people, the ability to enforce consumer, labor, antitrust, and civil rights 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, arbitration has become a virtual get-out-of-jail-free card many companies use to circumvent the basic rights of consumers and workers.

The FAIR Act reverses this disastrous trend by prohibiting the enforcement of forced arbitration clauses in consumer, labor, antitrust, and civil rights disputes.

Importantly, this legislation does not preclude both parties from agreeing to arbitrate a claim after a dispute arises. It does, however, protect unsuspecting consumers and employees from being forced to give up their right to seek justice in court.

Last month, Congress came together in a bipartisan fashion to prohibit forced arbitration clauses in suits concerning sexual harassment and sexual assault. Watching that legislation be signed into law was a proud moment for many of us in this Chamber. This bill simply extends the same basic fairness in that bill to other workers and consumers.

That bipartisan bill, which gathered, as I recall, about 130 Republican votes, is exactly the same as this bill, only limited in its application.

Every argument for that bill is an argument for this bill. This bill simply extends the same basic fairness in that bill, as I said, to other workers and consumers.

I thank the gentleman from Georgia (Mr. Johnson) for his leadership on this bill.

Mr. BISHOP of North Carolina. Madam Speaker, I yield myself such time as I may consume.

I rise in opposition to H.R. 963. There is nothing fair about the FAIR Act. The bill would undermine Americans' freedom to contract; burden the judicial system, both Federal and in all States in the country; and restrict access to justice.

This bill would ban arbitration agreements across nearly all contracts. It outlaws arbitration agreements in employment disputes, consumer disputes, antitrust disputes, and civil rights disputes. It outlaws arbitration agreements with respect to not only big, huge corporations but the most humble businesses and parties in the country, those that I served in my law practice.

Democrats propose that arbitration is bad for Americans, but it has been a fixture of our legal landscape for almost 100 years. They claim that arbitration is forced. Both of their claims are wrong.

Arbitration has many benefits. It is more efficient and faster than going to court. The rules are not nearly as arcane. Injured parties get their relief sooner, and they spend less money along the way.

Plaintiffs in employment and consumer disputes, according to studies, actually win more in arbitration than they do in court. They get more money in arbitration. They win more often in arbitration.

Democrats know that arbitration has plenty of benefits. How do you know this? Because in this very bill, Democrats have carved out their union friends from the mandates of this bill.

In other words, if the bill becomes law, powerful unions, and no one else, can still use these valuable agreements vis-a-vis individuals.

This carve-out also tells us that Democrats know there is no such thing as forced arbitration. Agreements that are truly forced are already illegal under existing law in every State in the country.

People are no more forced to agree to an arbitration provision than they are to agree to any other provision of a contract. The bill, instead, bans private parties from knowingly and willingly agreeing on a process to resolve future disputes. It tells Americans, no matter how informed or sophisticated they may be, that they can't be trusted to manage their own relationships by agreeing in advance to the means of resolution to be used in the event of a dispute.

Our Democrat colleagues seem to believe that Americans can't be trusted to think for themselves. Big Government needs to tell them what to do. Their freedom to contract should be restricted by the wisdom from Washington.

Democrats argue that this bill is no big deal because parties can still decide to use arbitration after a dispute arises, but that never happens in practice for much the same reason that many disputes go to court and are resolved outside of a jury. About 1 to 2 percent actually go all the way.

The decision to get into a lawsuit is not always purely rational, taken from all points of view, and is often affected by tempers that are different once the dispute has arisen than when the parties are considering a position of cool judgment in advance.

Their incentives change after a dispute has arisen, and people will pick a strategy to resolve that dispute at that time. They won't necessarily be looking for a process, then, that is good for both parties for many reasons.

When you are immersed in a dispute, there is also a greater chance that a lawyer that you may have retained would have an incentive to direct you in the direction of litigation rather than arbitration, and those incentives certainly won't necessarily be consistent with a faster and cheaper alternative.

Rather than helping the little guy stand up to big companies, this bill would take the option to arbitrate off the table for everybody and put more money in the pockets of trial lawyers, most especially plaintiffs' class action trial lawyers.

The bill would force more people into court. They will pay more and possibly recover less. But it would also force some people out of the justice system altogether.

Some people will be unable to pay for an expensive lawsuit, or they may have a claim so small that it is only practicable for them to bring it themselves, which arbitration facilitates.

Let's be clear, too. The surge in new lawsuits hurts employment. It hurts businesses and keeps them from being able to afford to hire more people. It will raise their costs at the worst possible time, when they are already dealing with supply chain problems and record inflation caused by failed Democrat policies, and not only by prohibiting the use of arbitration going forward but by retroactively eliminating it, rendering it null and void in millions of contracts already outstanding right now, at this point in the life of our Nation, when we have 8 percent inflation, another constraint on the supply chain imposed by Democrat policies.

Everyone should be sounding the alarm on this blatant overreach. At the end of the day, this bill curries favor with the plaintiffs' bar and union bosses, and it does so at the expense of hardworking Americans and small businesses, especially.

For these reasons, I urge my colleagues to oppose H.R. 963, and I reserve the balance of my time.

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Mr. NADLER. Madam Speaker, I yield myself such time as I may consume.

I want to correct something Mr. Bishop said. This bill does not ban arbitration. It bans forced arbitration. It bans the practice or the enforceability of the practice of having a provision in a contract that you sign to buy anything or an employment contract where you are forced, that is there and that if you try to change it, they won't sell you the car, they won't sell you the cell phone, they won't hire you, so you have no choice, and that forced arbitration removes the constitutional right to a trial by jury.

Madam Speaker, I yield 2 minutes to the gentleman from Tennessee (Mr. Cohen), a member of the Judiciary Committee.

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Mr. NADLER. Madam Speaker, I yield 4 minutes to the gentleman from Rhode Island (Mr. Cicilline), a member of the Judiciary Committee.

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Mr. NADLER. Madam Speaker, I yield 4 minutes to the distinguished gentleman from Georgia (Mr. Johnson), a member of the Judiciary Committee and a sponsor of this bill.

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Mr. NADLER. Madam Speaker, I yield the gentleman an additional 1 minute.

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Mr. NADLER. Madam Speaker, I yield myself such time as I may consume.

I just want to point out that this bill does not ban arbitration. If two parties have a dispute and prefer arbitration to going to court, they can have arbitration. This bill bans forced arbitration, meaning arbitration that is entered into contracts that people have no ability to change. That is why it says pre-dispute arbitration agreements are struck by this bill, not post-dispute arbitration agreements.

So this bill does not eliminate arbitration agreements if they want to. It does eliminate forced arbitration agreements that the party, usually the employee or the consumer had no knowledge of probably and no ability to say no to. We used to call them contracts of adhesion, but we don't do that anymore.

Madam Speaker, I yield 3 minutes to the gentlewoman from Texas (Ms. Jackson Lee), a member of the Judiciary Committee.

Ms. JACKSON LEE. Madam Speaker, I thank my friends and colleagues, Chairman Johnson and Chairman Nadler, for this long overdue legislation that we voted on last year; and, as well, to acknowledge the forced arbitration legislation that was signed by the White House dealing with sexual assault.

Now we have come full circle, so let me try to reinforce, because our friends on the other side of the aisle--and I call them friends--not only have it wrong, they have it upside down. It is completely misconstrued as to what this legislation does.

And if you go out on the street corner and talk to any American they will say, of course I want the FAIR Act, because forced arbitration says to them that, in essence, you are obligated, you are indentured to the contract that you signed to get a job, to buy a phone, to get that big TV, and that you are not able to pursue your due process rights.

Now, this is a constitutional issue. The Fifth Amendment completely indicates that you cannot be deprived of life, liberty, or property without due process of law, however you choose your due process of law.

We go on to the 14th Amendment; of course, part of the historic 13th, 14th and 15th Amendments, and it indicates that no State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States under this Constitution, which includes the right to a trial by jury, nor shall any State deprive any person of life, liberty, or property without due process again; and that you would guarantee equal process and justice under the law.

So let me factually say, though the signing of any contract or document is voluntary, often large corporations make it impossible to use their product or be employed without agreeing to a contract with a forced arbitration, making signing of the contract or document anything but voluntary; and clearly, it has constitutional implications.

Something that should alarm all American consumers is that according to a study commissioned by University of California Davis Law Review, 81 companies in the Fortune 100, including subsidiaries or relating affiliates, have used arbitration agreements in connection with consumer transaction.

Now let me be very clear. When you have a dispute, we are perfectly happy for you, as the individual, part of the contract, to say to the corporation, I don't care about my rights. I am going to throw myself on the mercy of arbitration. And in doing so, you may subject yourself to a limited decision, as Brian Flores was finding out.

Madam Speaker, let me tell you that American economic supremacy does not stem from the contributions of modern-day oligarchs, billionaires, CEOs, or the wealthy. It comes from the middle class. It comes from those 60 million workers and countless others who put in an honest 8- hour day, five times a week, in the simple pursuit of trying to feed their families and take care of their communities.

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Mr. NADLER. Madam Speaker, I yield the gentlewoman an additional 30 seconds.

Ms. JACKSON LEE. Madam Speaker, I thank the gentleman for his generosity.

I oppose the upcoming amendment that talks about not excluding unions. Unions have agreements between individuals. Unions have the power, through their persons they represent, to vote yea or nay for that contract. So if they vote yea or nay on that contract, their eyes open on the arbitration, it is the union that will be protecting that individual. They will not be in that process alone.

In the instance of an individual and the contracts that are signed, they will be alone. But they will not be alone if the FAIR Act is passed and the Constitution is upheld. That is why I support enthusiastically the FAIR Act and oppose the amendment to be forthcoming.

Pass the FAIR Act because justice and the Constitution requires it.

Madam Speaker, I rise in strong support of H.R. 963, ``The FAIR Act'' which prohibits a predispute arbitration agreement from being valid or enforceable in an employment, consumer, antitrust, or civil rights dispute.

Action on this legislation is long overdue considering the long history of the problems caused by forced arbitration. The FAIR Act was passed by the House in the 116th Congress, so I hope we can pass it again now and that the Senate will do the same this time so we can finally resolve this problem.

Forced arbitration is typically due to a clause in a contract that takes away employees' and consumers' rights to pursue litigation in the case their legal rights are violated. 60 million American employees and myriad consumers are unfairly, and usually unknowingly, subjected to its limitation of their legal rights.

Though the signing of any contract or document is voluntary, often large corporations make it impossible to use their product or be employed without agreeing to a contract with a forced arbitration clause, making signing of the contract or document anything but voluntary.

Something that should alarm all American consumers is that, according to a study commissioned by the University of California Davis Law Review, 81 companies in the Fortune 100, including subsidiaries or related affiliates, have used arbitration agreements in connection with consumer transactions.

The study also found that possibly two-thirds of American households are covered by consumer based forced arbitration agreements.

This means nearly 86 million American households have their Constitutional right of access to the judicial system restricted.

For American employees, the numbers are also staggering. Similarly, 60 million American employees are subject to forced arbitration agreements of which they are often unaware until a dispute arises for which they seek judicial redress.

The extensive reach of arbitration clauses is only increasing, with the Economic Policy Institute estimating 80 percent of private sector nonunion workers being subject to forced arbitration clauses by 2024.

Madam Speaker, American economic supremacy does not stem from the contributions of modern-day oligarchs, billionaires, CEOs, or the wealthy; it comes from the middle class. It comes from those 60 million workers and countless others who put in an honest 8-hour day 5 times a week in the simple pursuit of trying to feed their families and take care of their communities.

The fact that so many of these hard-working Americans are having their legal rights taken away without them knowing it is morally reprehensible and must be put to an end. The FAIR Act remedies that 1 problem.

In addition to being sound policy, the FAIR Act promotes racial equity in our rapidly diversifying country and workforce.

Another study from the EPI found 59.1 percent of African American workers (7.5 million workers) are subject to mandatory arbitration, as are female workers (at 57.6 percent).

Unfortunately, this is not surprising considering African Americans and women are two of the most historically discriminated against groups in the United States.

Forced arbitration continues the struggles of African Americans in the workplace, from slavery, sharecropping, and redlining to ongoing segregation, discrimination, racism, and voter suppression. As these statistics show, our struggle for equity in the workplace continues.

We are exhausted, yet we remain in the fight. We must continue to set right historical wrongs, and the FAIR Act provides us an avenue to do so.

Fairness in the workplace for women is also further remediated by this legislation. In this country, we have a disgraceful wage gap between men and women of 82 cents to the dollar, according to the latest Bureau of Labor Statistics figures.

As a Member of the Women's Caucus, I have been fighting for pay equity for American women since before I arrived here as a Representative in 1995, and I believe that equal pay for equal work is a simple matter of justice.

Wage disparities are not simply a result of women's education levels or life choices. In fact, the pay gap between college educated men and women starts as soon as they enter the workplace and expands shortly thereafter. Women can have the same background, work in the same field, and perform the same functional position, yet still be grossly underpaid. Disproportionately subjecting women to forced arbitration is yet another stain on this country's historical attitude towards women in the workforce.

I have consistently been a proud sponsor and cosponsor of legislation that expands legal rights, creates a more level playing field, and erodes long standing social disparities.

The FAIR Act achieves these goals, and I therefore urge my colleagues to support the FAIR Act.

Mr. BISHOP of North Carolina. Madam Speaker, I yield myself such time as I may consume.

On the other side of the aisle, we hear repeated references to defending the Constitution and the American way. I would remind the Chamber that our economy, the American economy, is built on contracts; which contracts, under the rule of law, are not forced, but enforced when someone refuses to abide by his or her agreement. That is not forced. That is where a contract is enforced.

We, our courts, our judicial system, and, yes, arbitration is the means by which we call people to live by their bargains, and that has been the key to the most successful economy in the history of the world. It has certainly been the state of affairs, as I said, for almost 100 years.

Throwing that out, dispensing with a major component of that on the premise that you are pursuing the American system is contrary to fact. It is, as Democrats often seek to do, it is transformational. It seeks to transform America, not to reinforce and persist it.

Madam Speaker, I yield 3 minutes to the gentleman from California (Mr. McClintock).

Mr. BISHOP of North Carolina. Madam Speaker, I thank the gentleman from California for his remarks.

It causes me to remark, as the gentleman from Tennessee said a moment ago, that it is Democrats who look out for the interests of the little guy and look out for the interests of the people. I wonder why it is that looking out for the interests of the people invariably involves restricting their freedom in some way. What a remarkable notion.

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Mr. NADLER. Madam Speaker, I yield 3 minutes to the distinguished gentlewoman from Washington (Ms. Jayapal), a member of the Committee on the Judiciary.

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Mr. NADLER. Madam Speaker, I yield 4 minutes to the gentlewoman from Pennsylvania (Ms. Wild).

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Mr. NADLER. Madam Speaker, I yield an additional 1 minute to the gentlewoman from Pennsylvania.

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Mr. NADLER. Madam Speaker, I yield 2 minutes to the gentlewoman from Illinois (Ms. Schakowsky).

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Mr. NADLER. Madam Speaker, I yield back the balance of my time.

Mr. BISHOP of North Carolina. Madam Speaker, I yield myself the balance of my time.

Madam Speaker, I was intrigued by the situation we just had on the floor, the gentlewoman from Pennsylvania, I think she said she represented big corporations. Yet, she spoke to the fundamental unfairness of arbitration. It is ironic perhaps.

I spent almost 30 years--29 years in the practice of law as a litigator representing people in court and in arbitration equally. I represented plaintiffs and defendants both, frequently individuals, often businesses, always small to medium-sized businesses, and occasionally a local government or two, never a big company.

I have had clients who didn't want to have arbitration agreements enforced and sometimes I could defeat them or have them modified or change the results of them because the arbitrator had manifested disregard for the law. Sometimes I had clients who wanted to enforce those agreements. It depends on the circumstances.

But I can tell you it is not a tool that is uniformly bad. Although I have voted for accepting enforceable arbitration agreements, arbitration clauses involving sexual harassment and sexual assault cases, I don't believe that throwing the baby out with the bath water is a good idea. It is a terrible idea.

Let me let America in on the inside scoop. Here is what this is about. For the past, roughly, decade there have been a series of cases in the United States Supreme Court in which, through various efforts and methods, plaintiffs' class action lawyers, lawyers for big class litigation where they make millions and millions in fees, have tried various approaches to get the United States Supreme Court to allow class actions to be pursued through arbitration, and they have failed. That is why this bill is here.

The bill is to reverse the result of that decade of litigation in the Supreme Court in order for class action lawyers to be able to have a field day and to make a lot of money. This bill protects and seeks the fortune of plaintiffs' class action lawyers, and of course, it protects the patronage of big unions both at the same time. That is what the bill is about.

Madam Speaker, for that reason, I urge my colleagues to oppose this bill, and I yield back the balance of my time.

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Mr. NADLER. Madam Speaker, I claim the time in opposition to the amendment.

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Mr. NADLER. Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, I rise in strong opposition to this amendment, which would significantly weaken this legislation and damage the collective bargaining process for tens of millions of working Americans.

We have said it over and over again today--this bill is not designed to eliminate arbitration. While my Republican colleagues would like you to believe that the FAIR Act will end arbitration entirely, that is simply not true.

The FAIR Act would put an end to forced arbitration--arbitration that is not willingly agreed to by both sides, which is a predatory one- sided practice created by and for huge corporations to allow them to get away with abusive conduct. It is a system that can exist only when these companies can take advantage of a stark power imbalance between themselves and workers, consumers, and small businesses.

Labor unions correct that power imbalance. The collective bargaining process provides real protections that are unavailable to nonunion workers by forcing big businesses to compromise with skilled negotiators focused on improving terms for their workers.

Collective bargaining guarantees other important protections in the arbitration process, such as truly neutral arbitrators, better procedures, transparent decisionmaking, and the option to appeal decisions. It creates a system that can actually resolve disputes quickly, efficiently--and most important--fairly for all parties involved.

That is not forced arbitration precisely because it is truly voluntary. Arbitration only works when two parties of equal bargaining power can negotiate terms that work for everyone involved, which is exactly what happens when a labor union and a corporation establish a collective bargaining agreement.

That is completely different than forced arbitration of nonunion employment disputes where an employee is forced to accept an arbitration clause that is buried deep inside the fine print of a stack of confusing paperwork on a take-it-or-leave-it basis that they must sign to get a job.

The big corporations love this system because it forces their workers, it forces employees, it forces the purchasers of products to go to forced arbitration, and that is an inherently skewed process. That is why the employee loses 98 percent of the forced arbitrations. The employer wins 98 percent of the forced arbitrations. That is not a fair process.

Moreover, as my colleague, Congressman Perlmutter, made clear during the Rules Committee meeting on this bill, nothing in the FAIR Act prevents individual workers from deciding to vindicate their rights before a jury.

As the plain language of the bill states, no collectively bargained arbitration provision ``shall have the effect of waiving the right of a worker to seek judicial enforcement of a right arising under a provision of the Constitution of the United States, a State constitution, or a Federal or State statute, or public policy arising therefrom.''

In other words, this amendment is a solution in search of a problem that could upend the rights of millions of workers today.

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Mr. NADLER. Madam Speaker, I yield 1 minute to the distinguished gentlewoman from Texas (Mrs. Fletcher).
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Mr. NADLER. Madam Speaker, I yield myself the balance of my time.

Madam Speaker, there are over 60 million workers--a majority of nonunion private-sector employees--who are subject to forced arbitration clauses. According to the Economic Policy Institute, that number will be over 80 million by 2024. Those employees are told that if they want to get a job or keep their current job they must sign away their right to their day in court and submit to a forced arbitration agreement. In most cases they do not have a choice.

When these workers seek to hold their employers to account for wage theft, civil rights abuses, or racial discrimination, they are shoved into a secretive arbitration process designed by corporations with almost unlimited resources, and they lose 98 percent of the time. That is what the FAIR Act will fix. This legislation will restore these workers' access to our justice system and guarantee their constitutional rights by ending forced arbitration.

This amendment would do nothing to protect workers while undermining this important legislation.

Madam Speaker, I urge my colleagues to oppose this unnecessary and harmful amendment, and I yield back the balance of my time.

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