Update on Legislation Seeking ADR Reform: Race Discrimination Arbitration Bar Proposed

While arbitration may provide a relatively fast, cost-effective alternative to litigation, its potential to entrench pre-existing power imbalances has inspired legislative efforts to rein in the reach of the Federal Arbitration Act. 

Last year saw the first big step, the enactment of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (background on CPR Speaks here). Employees alleging workplace sexual assault and harassment can now bypass contractual obligations to arbitrate disputes, and take their claims to public court instead. The act came in response to the #MeToo movement and the increased public awareness that private, individual arbitrations--as opposed to public, class-action litigations--may invite power dynamics into the judgment. 

More recently, Congress proposed a further carve-out: invalidation of mandatory arbitration clauses in racial discrimination cases. Early last month, U.S. Rep. Colin Allred, D., Texas, and U.S. Sen. Cory Booker, D., N.J., introduced the Ending Forced Arbitration of Race Discrimination Act, which gives individuals asserting racial discrimination the option to file suit in court even if they had agreed to arbitration before the claims arose. 

"No one should have to sign away their right to hold their employer accountable in court for racial discrimination, and this legislation will empower individuals to fight back against discrimination and promote equality in the workplace." said Booker in a press release. "No matter what you do for a living, no one should be denied their day in court or denied accountability for racial discrimination because of forced arbitration," added Allred. 

The bill: 

• defines the term "race discrimination dispute" as those disputes arising from "discrimination (including harassment), or retaliation, on the basis of race, color, or national origin under applicable Federal, Tribal, State, or local law."
• clarifies that any question as to the applicability of the Act or enforceability of arbitration agreements shall be determined by a court, rather than an arbitrator.  
• invalidates pre-dispute joint-action waivers, which refers to an agreement, "whether or not part of a predispute arbitration agreement, that would prohibit, or waive the right of, one of the parties to the agreement to participate in a joint, class, or collective action in a judicial, arbitral, administrative, or other forum, concerning a dispute that has not yet arisen at the time of the making of the agreement." 9 U.S.C § 401(2).

The bill draft can be found here. Advocates are hopeful the bill will pressure disproportionately powerful employers including the country's largest sports leagues. David Steele, "Forced Arbitration Bill In Congress Shines Harsh Light On NFL," Law360 (May 22) (available here), discussing a racial discrimination class action suit brought by former Miami Dolphins head coach Brian Flores against the National Football League. 

There’s more. The bills listed below, newly introduced this past year, attempt to invalidate pre-dispute arbitration agreements in their respective regulated sectors: 

• The Kids PRIVACY Act, an April proposal protecting children’s online privacy, especially against tracking and data gathering;
• The Union Integrity Act, providing whistleblower protections for union employees who speak out against union bosses, and 
• The Airline Passengers’ Bill of Rights, strengthening the rights of airline passengers and banning class waivers.

More broadly, the Forced Arbitration Injustice Repeal Act of 2023 would ban mandatory arbitration of employment, consumer, antitrust, and civil rights disputes. The bill has been reintroduced this April following failed attempts in 2019 and 2022 See CPR Speaks here on the FAIR Act of 2022 and its lengthy legislative history.  Rep. Hank Johnson, D., Ga., one of the bill’s co-sponsors, explained the FAIR Act as combating mandatory arbitration which “bans claimants from banding together and where the deck is stacked against the little guy.” See his April House statement here.

 The FAIR Act is not alone. A larger number of initiatives have been brought back this legislative session to limit the use of arbitration:

• The SEC Whistleblower Reform Act of 2023 clarifies that whistleblowers cannot waive their rights to jury trial through a pre-dispute arbitration agreement.
• The Workforce Mobility Act of 2023 invalidates pre-dispute arbitration clauses with respect to any alleged violation of a proposed prohibition against noncompete agreements. 
• The Justice for All Act of 2023 safeguards the right to sue in public court against civil rights violations.

One other way to rein in arbitration arrangements is to strengthen disclosure requirements. Sen. Elizabeth Warren, D., Mass., and Rep. Nikema Williams, D., Ga., proposed the Sunlight in Workplace Harassment Act, which requires public companies to disclose all settlements and judgments--including through arbitration--related to sexual abuse, harassment or discrimination disputes. The required disclosure includes the number of settlements and judgments, the amount paid, and the number of complaints pending, again including arbitration. 

 A departure from this trend is the Better Agriculture Resources Now (BARN) Act, a bill that requires the Legal Services Corporation to respect the process and outcome of any arbitration agreed to by an employer and non-immigrant workers. The proposal would prohibit Legal Services Corp. assistance to aliens unless the worker is in the U.S. and “attempted, in good faith, mediation or other non-binding dispute resolution of all issues involving all such parties.” The reform is perhaps less surprising given that the legislation aims to enhance farmers’ ability to hire foreign nationals during harvest season. 

But more surprising is a bill that sets up an arbitration program. The Forest Litigation Reform Act of 2023 orders the Secretaries of Agriculture and the Secretary of the Interior to establish a discretionary arbitration pilot program to address challenges to forest management activities. 

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The author, a student at Harvard Law School in Cambridge, Mass., is a 2023 CPR Summer intern.

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