By Kathryn Meyer
ALR Senior Editor, 2018-2019

On October 30, 2018, Congressman Jerrold Nadler of New York introduced House Resolution 7109, entitled Restoring Justice for Workers Act (H.R. 7109).[1] The purpose of H.R. 7109 is “[t]o prohibit forced arbitration in employment disputes.” [2] Forced arbitration, in the employment context, requires that an employee forgo her rights to sue her employer individually or as part of a class and must instead resolve any employment disputes through arbitration.[3] The requirement to arbitrate is often included in a mandatory arbitration clause embedded in the employment contract, which must be signed as a condition to employment.[4] If passed, employers could no longer force employees to arbitrate employment disputes, whether through forced arbitration agreements or through threatened retaliation or termination.

Beginning in the 1990s, the Supreme Court began its trend of ruling in favor of mandatory arbitration when it found that an employee who was bound to arbitration through his professional registration as a securities representative could be forced to arbitrate by his employer as a result of the registration.[5] Since then, the Supreme Court has a repeatedly ruled in favor of mandatory arbitration clauses in employment contracts,[6] including those that prevent class actions.[7] Thus, if Congress passes H.R. 7109, it will undue almost 30 years of Supreme Court decisions.

H.R. 7109 states four purposes that it hopes to accomplish. First, it would “prohibit predispute arbitration agreements that require arbitration of employment disputes.”[8] If passed, employers would no longer be able to include mandatory arbitration clauses in their employment contracts, meaning agreeing to the mandatory arbitration of employer disputes would no longer be a condition to employment. This would have a major impact, as it would likely affect over half of the “nonunion private-sector” workforce in the United States.[9] Next, H.R. 7109 would “prohibit retaliation against employees for refusing to arbitrate employment disputes.”[10] Previously, the U.S. Court of Appeals for the Second Circuit upheld as lawful an employer’s termination of an employee for refusing to submit to mandatory arbitration.[11] If passed, H.R. 7109 would protect employees from such termination or other forms of retaliation. Additionally, H.R. 7109 would also require employers “provide protections to ensure that postdispute arbitration agreements are truly voluntary and with the informed consent of employees.”[12]  Lastly, it would “amend the National Labor Relations Act to prohibit agreements and practices that interfere with employees’ rights to collectively litigate employment disputes,” likely in response to the Epic Systems decision.[13] The Court decided in Epic Systems that the ability to take part in a class action lawsuit is not a “concerted activity” under the National Labor Relations Act (NLRA).[14] Had it been a concerted activity, it would have been protected by the NLRA.[15] The Court concluded that the NLRA focused on employees’ rights to collective bargaining and forming unions but said nothing about class litigation.[16] Thus, if Congress passes H.R. 7109, the NLRA would likely have to be amended to include language that would protect an employee’s right to sue or take part in a class action suit.

If this Bill were to pass, it would have a resounding impact on both arbitration and litigation. It would greatly diminish an employer’s ability to force its employees into arbitration, while increasing employee rights. This Bill would likely result in higher accountability for employers by taking away an employer’s ability to force their employees to arbitrate according to the employer’s rules. It would also make class action litigation more accessible for employees, which means it would be more likely that employees would have to issue bigger payouts to employees for the employer’s misdeeds.

 

[1]  Restoring Justice for Workers Act, H.R. 7109, 115th Cong. (2018).

 

[2] Id.

 

[3] Arbitration, Nat’l Ass’n of Consumer Advocates, https://www.consumeradvocates.org/for-consumers/arbitration (last visited Dec. 14, 2018) (stating that forced arbitration, in the employment context, requires that an employee forgo her rights to sue her employer individually or forgo her rights to participate in a class action lawsuit).

 

[4] See also Alexander J.S. Colvin, Economic Policy Institute, The growing use of mandatory arbitration: Access to the courts is now barred for more than 60 million American workers 2 (2017); supra note 1, § 2(1) (explaining that forced arbitration agreements are often included in the employment contracts, which must be signed as a condition to employment).

 

[5] See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23, 35 (1991) (holding that by registering as a securities representative through the New York Stock Exchange, a requirement for the employee’s job, the employee was subject to the mandatory arbitration clause located within the registration application, and the employer had the authority to subject the employee to mandatory arbitration as a result); Thomas E. Carbonneau, Arbitration Law: In a Nutshell 250, 4th ed. (2017) (stating that the Court in Gilmer found that “the obligation to arbitrate claims against the employer . . . arose as a result of professional registration and was implied and direct”).

 

[6] See Circuit City v. Adams, 532 U.S. 105, 119 (2001) (holding that, under the Federal Arbitration Act (FAA), a mandatory arbitration clause in an employment contract allows for employment issues to be arbitrated and stating that the only employment contracts that cannot mandate arbitration are those of transportation workers); see also Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) (holding that a provision in an employment contract that only allowed for employment-related disputes to be arbitrated was legal).

 

[7] Epic Systems, Corp. v. Lewis, 138 S.Ct. 1612 (2018).

 

[8] Supra note 1, § 4.

 

^[9] Alexander J.S. Colvin, Economic Policy Institute, The growing use of mandatory arbitration: Access to the courts is now barred for more than 60 million American workers 1 (2017).

 

[10] Supra note 1, § 4.

 

[11] Williams v. Parkell Products, Inc., 91 Fed.Appx. 707 (2nd Cir. 2003).

 

[12] Supra note 1, § 4.

 

[13] Supra note 1, § 4.; Epic Systems, 1617 S.Ct.

 

[14] Epic Systems, 1617 S.Ct.

 

[15] Id.

 

[16] Id.