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On July 15, 2008, the House Subcommittee on Commercial and Administrative Law voted to report favorably the Arbitration Fairness Act of 2007 (H.R. 3010) to the full Judiciary Committee. H.R.3010 was introduced in the House by Rep. Hank Johnson (D-GA) on July 12, 2007, and the Subcommittee held hearings on the Act in October.
H.R.3010 would amend the Federal Arbitration Act by invalidating any pre-dispute arbitration agreement requiring mandatory arbitration of disputes under employment, consumer or franchise contracts, or any dispute arising under a statute “intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.” The Act allows arbitration of disputes if both parties agree to use arbitration after a dispute arises and would not invalidate arbitration clauses in collective bargaining agreements.
Rep. Johnson stated that arbitration has become increasingly common in contracts between businesses and parties with less bargaining power, such as employees or consumers, and that arbitration clauses are often obscure and “buried” in such agreements. Rep. Johnson also noted that arbitration providers have a strong incentive to favor the business hiring them, creating a biased forum with little accountability or oversight.
Rep. Chris Cannon (R-Utah) criticized the Act as interfering with contract rights and also expressed concerns that eliminating arbitration would decrease the ability of employees to pursue small claims. Critics of the Act have echoed Rep. Cannon’s concerns, emphasizing that the Act may hurt the very parties it seeks to protect by slowing the dispute resolution process and raising litigation costs.
The Senate Version of H.R.3010, S.1782, was introduced by Sen. Feingold (D-WI) on July 12, 2007 and referred to the Committee on the Judiciary. H.R.3010 has 101 co-sponsors, while S.1782 has six co-sponsors.