House Subcommittee Introduces Bill that Would Restrict Arbitration

By Tamia Sutherland

The House Committee on Education and Labor’s Subcommittee on Health, Employment, Labor, and Pensions held a Nov. 4 hearing on employment arbitration to introduce the “Restoring Justice for Workers Act.” The meeting and bill was presented by House Education and Labor Committee Chairman Bobby Scott, D., Va., and House Judiciary Committee Chairman Jerrold Nadler, D., N.Y.

The text of the Restoring Justice for Workers Act is available here. The act would

  • prohibit pre-dispute arbitration agreements that require arbitration of work disputes;
  • prohibit retaliation against workers for refusing to arbitrate work disputes;
  • provide protections to ensure that post-dispute arbitration agreements are truly voluntary and with the informed consent of workers;
  • amend the National Labor Relations Act to prohibit agreements and practices that interfere with employees’ right to engage in concerted activity regarding work disputes, and
  • reverse the U.S. Supreme Court’s 5-4 decision in Epic Systems Corp. v Lewis, available here. (Earlier this week, the Court agreed to hear a case that could clarify the extent of the seminal case’s application. For more, see Mark Kantor, “U.S. Supreme Court Adds an Arbitration Issue: Is Proof of Prejudice Needed to Defeat a Motion to Compel?” CPR Speaks (Nov. 15) (available at https://bit.ly/3FnfyGd).

The subcommittee meeting, “Closing the Courthouse Doors: The Injustice of Forced Arbitration Agreements,” began with an opening statement from committee Chairman Mark DeSaulnier, D., Calif. Senior Georgia Republican committee  Rick W. Allan gave an opening statement, and then four witnesses provided testimony:

  1. Alexander Colvin, Dean of the School of Industrial and Labor Relations at Cornell University;
  2. Glenda Perez, Former Implementation Set-Up Representative at Cigna;
  3. G. Roger King, Senior Labor and Employment Counsel at the Arlington, Va.-based HR Policy Association, a nonprofit membership group of “over 390 large” corporations’ chief human resource officers; and
  4. Kalpana Kotagal, a Partner in Cohen Milstein Sellers & Toll’s Washington, D.C., office.

First, Chairman DeSaulnier began by introducing the topic of “forced arbitration” agreements and collective action waivers, explaining that for many employees, employment documents “include an arbitration clause, hidden in the fine print,” which requires workers to sign the document or forgo employment.

Next, he provided data to support the assertion that the use of these agreements is widespread. He explained that “in 1990, 2.1% of non-union employees had an arbitration clause in their employment contracts . . . [and in] 2018, nearly 60% of all nonunionized private-sector employees were covered by forced arbitration agreements.”

Chairman DeSaulnier provided other examples of what he described as unfair practices and, finally, introduced the Restoring Justice for Workers Act as a solution.

Rep. Allan countered in his opening statement that the act is another instance of heavy-handed government reach that will be burdensome to employers and unfairly target job creators. Moreover, he asserted that the act would delay justice and continue to clog an already overrun court system.

Prof. Colvin, a longtime critic of mandatory arbitration processes, was the first witness to provide testimony. He provided statistics from his studies, cited at his link above, to show the increase use of arbitration, and how employees do worse in arbitration as opposed to the court. He also discussed how employees who use the arbitration process for the first time are at a structural disadvantage to companies who repeatedly use the process.

Next, Glenda Perez provided a personal account of her struggles with the arbitration process without a lawyer. Perez reported that she and her husband worked for Bloomfield, Conn.-based insurer Cigna from October 2013 to  July 2017. In April 2017, Cigna put her on a performance correction plan for work “errors” after meeting with her team on pharmacy benefits.

Her husband, a Cigna analyst, found evidence of errors by white women but none by his wife, according to Perez’s witness statement. She filed a discrimination complaint with Cigna’ human resources department. Typically, a full investigation takes 60 days, she reported, but in her statement, Perez said her investigation took one day, with human resources backing her manager’s claim. Two months later, she was fired.

Perez wanted to file a claim for discrimination and retaliation, but could not find an attorney to represent her in mandatory arbitration. She said she was forced to drive to a law library to do research while also taking care of her three children and looking for a new job. She claimed it took several months to choose an arbitrator.

Moreover, Perez reported, the arbitrator selected may have had a conflict of interest that was not disclosed. Perez’s testimony focused on arbitrator’s lack of impartiality. She reported that there are photos online of the arbitrator, and Cigna’s attorney, at the arbitrator’s 50th birthday party, which she filed with her committee testimony. Additionally, she testified, the arbitrator formerly worked for the firm representing Cigna and had Cigna’s counsel as a reference on his CV.

The arbitrator denied Perez’s request for materials to prove her case as Cigna claimed it would cost more than $1 million to retrieve “even though,” she said, “I was only requesting my employee personal profile.” Cigna moved for summary judgment, and then the arbitrator ruled in favor of Cigna, and canceled a hearing that had been scheduled. When Perez filed a motion to vacate the decision in court, she said Cigna fired her husband.

HR Policy Association attorney Roger King said that two of the legislation’s primary objectives are big mistakes and are a substantial overreach of congressional action. He explained that completely eliminating pre-dispute arbitration was a mistake, and a total prohibition on class-action waivers would be burdensome. Also, in response to Glenda Perez’s testimony, he asserted that generally, arbitrators are ethical.

Finally, Kalpana Kotagal testified that the justification for forced arbitration is predicated on myths because (1) there is no equal bargaining power in most forced arbitrations, (2) it burdens those who are already marginalized, (3) it is not speedy, and (4) it deters workers from bringing claims.

The meeting concluded with a Q&A from other committee members.

* * *

A video of the hearing, and witness statements, is available here. The Congressional repository page for the event can be found here.

* * *

The author, a second-year law student at the Howard University School of Law in Washington, D.C., is a CPR 2021 Fall Intern.

[END]

Increased Mobile Health Triggers Increased FTC Enforcement, and Points to a Need for Dispute Prevention Efforts

By Janice L. Sperow

The pandemic changed how we work, how we shop, how we communicate, and how we “meet.” It changed our world’s “normal.”

Most significantly, it changed the healthcare industry, but not only with new vaccines and protocols. It revolutionized the way we maintain our health and wellness, as healthcare app development now shapes the future of medicine.

That, in turn, provides an opportunity for a new application for alternative dispute resolution—specifically, a recent Federal Trade Commission statement puts health-care industry managers on notice that they should institute dispute prevention steps and protocols to avoid potentially costly civil penalties as their products face closer federal scrutiny.

Spurred by rapid significant advances in mobile technology, artificial intelligence, and the internet of things, medical apps have accelerated at an unprecedented rate. Even before the pandemic’s uptick in the use of healthcare mobility tools, the Physicians Practice medical publication conducted a mobile health survey in 2018 and found that more than 75% of respondents used some form of mobile health solutions on a weekly basis.

Since the pandemic, the use of mobile applications in healthcare, MedTech (see www.medtech.org), and eHealth has skyrocketed. A $21.3 billion market in 2017, the global mobile health market is anticipated to reach $151 billion by 2025. See, e.g., Grand View Research, mHealth Apps Market Size, Share & Trends Analysis Report By Type (Fitness, Medical), By Region (North America, APAC, Europe, MEA, Latin America), And Segment Forecasts, 2021–2028 (February 2021) (available at https://bit.ly/2Zqo5bR).

The U.S Food and Drug Administration defines a health app as mobile software that diagnoses, tracks, or treats disease. A wellness app uses mobile software to enhance or track overall user health. They can and do address every facet of life impacting wellness from mental, physical, social, environmental, nutritional, behavioral, to even spiritual factors.

In response to the market’s growth, the Federal Trade Commission issued its “Statement of the Commission on Breaches by Health Apps and Other Connected Devices” (Sept. 15) (available at https://bit.ly/3bgLv63).  The statement stresses the FTC’s commitment to protecting private medical and health information inputted into these apps and devices, and explains the FTC’s Health Breach Notification Rule in more detail. (The Rule is available at https://bit.ly/3nFzkpk.) The Statement unequivocally declares the Rule’s scope and the FTC’s intention to enforce the rule.

The FTC’s Health Breach Notification Rule has been in effect since 2009, when the American Recovery and Reinvestment Act of 2009 (text at https://bit.ly/3pGHtMy) became effective. The Rule addresses the security of personal health records, or PHR, defined to include an electronic record of identifiable health information on an individual that can be drawn from multiple sources and that is managed, shared, and controlled by or primarily for the individual. See 16 C.F.R. § 318.2(d).

“PHR identifiable health information” includes “individually identifiable health information,” as defined in section 1171(6) of the Social Security Act. See 42 U.S.C. 1320d-6. It also includes individual information provided by or on behalf of the individual that actually identifies or reasonably can be used to identify the individual. See 16 C.F.R. § 318.2(e) (“reasonable basis to believe that the information can be used to identify the individual”).

The Rule applies to (1) vendors of personal health records; (2) PHR-related entities that interact with vendors of PHRs or HIPAA-covered entities by offering products or services through their sites; (3) PHR-related entities that access information from or send information to a PHR; (4) PHR-related entities that process unsecured PHR identifiable health information as part of providing their services; and (5) third-party service providers for PHRs vendors.

The Rule does not apply to HIPAA-covered entities or any other entity to the extent that it engages in activities as a business associate of a HIPAA-covered entity.

Under the Rule, vendors of PHRs and PHR related entities must report a “breach of security” involving PHRs to the FTC, the consumers, and in some cases to the media. Service providers that process information for PHR vendors and PHR related entities also have a duty to notify their business customers of a security breach.

Typically, these service providers handle data storage or billing as a third-party provider. The Rule defines a “breach of security” as the acquisition of unsecured, PHR identifiable health information without the individual’s authorization.

Upon discovering a security breach, the entity must notify the required recipients within 60 days; but it must alert the FTC within 10 business days if the breach involves more than 500 individuals. Noncomplying entities face civil penalties of $43,792 per violation per day.

Rule Clarification

The FTC’s new Statement clarifies the Rule’s scope and application. It explains that the Rule covers PHRs vendors that contain individually identifiable health information created or received by health care providers. The Statement then specifies that health app and connected-device developers qualify as “health care providers” under the Rule because they “furnish health care services or supplies.”

Consequently, the Rule’s protections encompass any personally identifiable information developers create or receive that relates to the past, present, or future physical or mental condition of an individual; the provision of healthcare to an individual; or the past, present, or future payment for healthcare to an individual.

The Statement also emphasized that an electronic health record must draw information from multiple sources and be managed, shared, or controlled by or primarily for the individual before the FTC will consider it to be a PHR under the Rule.

The Statement, however, interprets multiple sources liberally to include other non-health related information. An electronic health record can draw information “from multiple sources” in the context of a health app, for example, through a combination of consumer inputs and application programming interfaces.

Hence, the Rule would apply to an app if it collects information directly from consumers and can technically draw information through an application programming interface that enables syncing with a consumer’s fitness tracker or phone, even if only one source provided the health information. For example, the Rule would cover a blood sugar monitoring app that collects health information only from the user’s blood sugar levels if it then uses non-health information from the user’s phone, such as date, time, or percentage figures.

The Statement also warns entities that the Rule does not limit a “breach of security” to cybersecurity intrusions, illegal behavior, or ill-intentioned activities. Rather, any unauthorized access will trigger the Rule’s notification duties, much like under HIPAA. Thus, a health app developer faces a reportable breach of security if it accidentally discloses private health information to a third party without the individual’s consent.

Rule Enforcement Change

In addition to clarifying the Rule’s scope, the FTC’s new Statement also signaled an enforcement sea change. Even though the Rule was enacted more than a decade ago, the FTC has not enforced it once since 2009.

The FTC admitted that it has not used the Rule. The Statement cautioned, however, that the FTC considers the Rule’s notification duties critical now in light of the surge in health apps and connected devices. The Statement explicitly declares the FTC’s intent to notify entities of their continuing obligation to publicize breaches under the Rule.

The Statement’s message is unequivocal: the FTC will enforce the Rule and its notice requirements from now on.

A Dispute Prevention Opportunity

Instead of being in a “more bad news” category, healthcare managers should file the FTC’s Statement as a new opportunity to prevent future disputes. The FTC Statement serves as a warning, affording the healthcare industry some time to implement strategies to protect itself from class actions, mass claims arbitration, and other costly disputes. By taking the warning seriously, the industry can assess and then minimize its risk.

The bottom line: Healthcare and wellness app developers should assess the Rule’s application to their services and the adequacy of their current security measures in order to prevent triggering the Rule’s notification provisions or even the possibility of a noncompliance finding.

And then they can breathe a sigh of relief if the current measures adequately protect the business, or implement new measures now to upgrade them until they do. Either way, the FTC handed the healthcare industry an opportunity to prevent costly future risk.

* * *

The author is a full-time neutral, arbitrator, mediator, dispute prevention facilitator, and Hearing Officer specializing in mass claims, healthcare, technology, employment, and all commercial matters. She works on domestic and international matters, and is based in La Mesa, Calif.

[END]

UNCITRAL Adopts Expedited Arbitration Rules

By Mylene Chan

This is the third part of a series of CPR Speaks posts reporting on the United Nations Commission on International Trade Law’s 54th session where the commission adopted legislative and non-legislative texts relating to alternative dispute resolution. 

At the three-week session concluding July 16, the commission adopted the UNCITRAL Expedited Arbitration Rules and the Explanatory Notes to the UNCITRAL Expedited Rules. These rules and notes complement and are intended to be read together with UNCITRAL’s well-known arbitration rules, which are for resolving international disputes and applicable both in administered arbitrations under the auspices of an arbitral institution, as well as in ad hoc arbitrations.

The UNCITRAL Arbitration Rules were originally developed as an alternative to other major rule systems. UNCITRAL’s innovative rules were initially viewed with skepticism, but over time, they have been frequently used in investment arbitrations, commercial arbitrations, arbitrations between states, and between states and individuals, such as for the Iran-U.S. Claims Tribunals and several bilateral investment treaties. Latham & Watkins Guide to International Arbitration (2019) (available at https://bit.ly/2VeZKU8).

The UNCITRAL Arbitration Rules have gone through three versions, in 1976, 2010 (revised to meet the needs of modern business including improvements to procedural efficiency, inclusion of provisions on multi-party arbitration and the development of rules on interim measures; available at https://bit.ly/3i7UrPq), and 2013 (incorporated rules on transparency for investment arbitrations based on treaties; available at https://bit.ly/2UZMEKH). See general background on the rules from UNCITRAL at https://bit.ly/3l6RyjD.

In 2018, UNCITRAL mandated Working Group II to explore ways to improve the efficiency of the arbitral proceedings through streamlining and simplifying procedures, resulting in the drafting of the UNCITRAL Expedited Arbitration Rules. The goal is to reach a final dispute resolution in a cost- and time-effective manner while ensuring due process and fair treatment for the disputants. (See https://undocs.org/en/A/CN.9/934 for the 2018 statement on expedited rules.)

For coverage of the early drafting process of the UNCITRAL Expedited Arbitration Rules, see Piotr Wójtowicz & Franco Gevaerd, “How UNCITRAL’s Working Group II on Arbitration Is Analyzing the Field to Help Expedited Processes” 37 Alternatives 90 (June 2019) (available at https://bit.ly/377Nfwg), and Piotr Wójtowicz & Franco Gevaerd,  “The Framework: The U.N.’s Working Group II Debates New Expedited Arbitration Rules,” 37 Alternatives 99 (July/August 2019) (available at https://bit.ly/3l5OLqS).

Special features in the UNCITRAL expedited arbitration rules include the following:

  • Disputes under the expedited procedures shall be settled in accordance with the UNCITRAL Arbitration Rules as modified by the expedited rules.
  • The expedited rules shall apply only with express consent by the disputants.
  • To facilitate speedy constitution of the tribunal, the claimant must include, with its notice of arbitration, the proposal of an appointment authority and the arbitrator. The notice of arbitration constitutes the claimant’s statement of claim. The respondent then has 15 days to file a response to the notice of arbitration. By contrast, under UNCITRAL Arbitration Rules, the time to respond is 30 days from the receipt of the notice of arbitration.
  • When the disputants cannot agree on an appointing authority, any disputant can request that the Permanent Court of Arbitration Secretary-General designate the appointing authority or serve as appointing authority. The PCA Secretary-General has discretion to decline serving as appointing authority and designate another authority if it deems it more appropriate. In this way, the UNCITRAL Expedited Rules have deviated from the default two-step designation/appointment procedure found in the non-expedited UNCITRAL Arbitration Rules.
  • The tribunal has discretion in shaping the proceedings, including extending or abridging timeframes (except for award issuance, as discussed in the bullet below) and determining whether hearings will be held or evidence taken.  This discretion represents an expansion of the discretion contained in the UNCITRAL Arbitration Rules.
  • The time period for rendering the award employs a bifurcated approach. If the tribunal considers that it is at risk of not rendering an award within nine months, it shall propose a final extended time limit. If all disputants agree, the extension is considered adopted.  If a party objects to the extension, however, any party may make a request that the UNCITRAL Expedited Rules no longer apply to the arbitration. After hearing the disputants, the tribunal may then decide that it will instead conduct the proceedings in accordance with the UNCITRAL Arbitration Rules, which do not contain the time limits.

The most contentious issue was the last bullet point above regarding the time period for rendering the award. Working Group II spent more than six hours debating on this point during the 54th session, focusing on how to balance the policy interest of promoting a truly expedited process with the goal of ensuring that the result of that process would be enforceable through the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention.

At one point, the U.S. delegation objected vehemently that “[u]sing this approach, as the default in the rules, creates a very concerning precedent for an uncontrolled instrument in our delegation’s experience.  . . . That is why we have drafted the compromise language that . . . seeks to bridge the gap between delegations like ours, who are very concerned about adopting a system that will likely produce unknowable awards, and those delegations who primarily are concerned that without a hard stop at nine months, the rules will enable arbitrators who were not very diligent, or who simply procrastinated to continue to take extensions.”

There were more concerns about protecting those with lesser means and bargaining power:

  • The U.S. delegation noted, “We think that given that these rules may be used by unsophisticated parties because they are expedited, . . . one of the goals is to reach out to parties who might be otherwise deterred from pursuing arbitration because of the cost.  . . .”
  • The Israel delegation point out that “[t]here could be concerns of parties with weaker bargaining powers that would have to be essentially compelled to agree to this.  . . .”

While the debate was heated, ultimately the member states drafted an innovative approach to reach a consensus. 

The UNCITRAL Expedited Arbitration Rules will appear together with the explanatory notes toward the end of the year as an appendix to the UNCITRAL Arbitration Rules.  In the fall, Working Group II will deliberate on rules about early dismissal of frivolous claims that will require modifications to the UNCITRAL Arbitration Rules. Working Group II will post the final rules, and currently has the drafts, here.

In addition, UNCITRAL is contemplating developing a new framework for adjudication. commonly known as dispute resolution boards, to complement the UNCITRAL Arbitration Rules. There has been a recurring expression of interest within UNCITRAL member states in the principle of rapid decision common to adjudication in construction projects. The U.S. delegation noted that it hoped that this principle can be adapted to expedite the resolution of disputes in other long-term contracts, or at least to mitigate the impact of those disputes.

UNCITRAL expects to conduct colloquiums to discuss adjudication next spring. With the adoption of the expedited rules, UNCITRAL is taking steps to expand the use of arbitration as a method of dispute resolution available to a wider range of parties.

Thomas W. Walsh, special counsel based in the New York office of Freshfields, who in his arbitration work focuses on UNCITRAL matters and worked on an early draft of the UNCITRAL Expedited Rules, said that the rules “are a welcome example of the arbitration community responding to the needs of the businesses that use arbitration. If parties have a commercial need to expedite the resolution of their dispute, the rules offer a thoughtful, ready-made procedure that they can select to meet that commercial need.”

The UNCITRAL Expedited Rules eliminate many of the obstacles that made arbitration costly and overly time-consuming, and the role of UNCITRAL as a global trend-setter on arbitration means that these new provisions are likely to be used as models worldwide.

* * *

The author, an LLM candidate at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, has covered UNCITRAL’s 54th Session proceedings for CPR Speaks as a 2021 CPR Summer Intern. Her articles can be found using the search box on the upper right of this page.

[END]

Biden Signs Resolution Restoring Pre-Trump EEOC Conciliation Rules

By Cai Phillips-Jones

On June 30, President Biden signed S.J. Res. 13, overturning a recent U.S. Equal Employment Opportunity Commission rule change that briefly required the EEOC to share more information with employers during the EEOC conciliation process.

CPR Speaks previously discussed the rule reversion, which Congress passed along party lines, and which will bring back the previous higher level of discretion on information to be provided by defendant companies.

Conciliation is a mediation-like process which happens after evidence of discrimination is found by the EEOC. Proponents and opponents of the short-lived rule both argued that their rule preferences would increase efficient settlement of EEOC cases.

The standard emanates from Mach Mining v. EEOC, 575 U.S. 480 (2015) (available at https://bit.ly/2TmuMZg), in which the U.S. Supreme Court granted broad discretion to the EEOC to determine how to proceed with the conciliation process, including the amount of information shared with the parties.

But the Trump-era rule, which went into effect in February, tamped down on this discretion, requiring the EEOC to share factual findings of discrimination such as the identity of witnesses to the discrimination.

Biden’s remarks upon signing can be found here.

* * *

The author, a J.D. student who will enter his third year this fall at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, is a 2021 CPR Summer Intern.

[END]

Part I: How Workplace ADR Will Evolve Under the Biden Administration

By Antranik Chekemian

Anna Hershenberg, Vice President of Programs and Public Policy & Corporate Counsel, welcomed an online audience of nearly 200 attendees for the CPR Institute’s webinar “What Labor and Employment ADR Will Look Like Under a Biden Administration?” The Feb. 24 webinar was presented jointly by CPR’s Employment Disputes Committee and its Government & ADR Task Force.

This is the first of two CPR Speaks installments with highlights from the discussion.

Hershenberg shared background information for attendees who were new to CPR, and reviewed CPR activities. [Check out www.cpradr.org for future public and members-only events, including the March 25 program on Managing Conflict in the Workplace Remotely. For information on access and joining CPR, please visit CPR’s Membership webpage here.]

Hershenberg then turned the program over to Aaron Warshaw, a shareholder in the New York office of Ogletree, Deakins, Nash, Smoak & Stewart, who is chair of CPR’s Employment Disputes Committee. Warshaw described the Employment Disputes Committee as “made up of in-house employment counsel, management-side attorneys, employee-side attorneys, and neutrals. Throughout its long history, the committee … [has provided] a platform for all of the stakeholders to come together and explore ways to resolve disputes in employment matters,”.

Last year, the committee presented a panel discussion about COVID-19-related employment claims. (Video available here.) There was also a panel discussion on mass individual arbitration claims during last year’s CPR Annual Meeting in Florida.

Warshaw also noted that the committee is currently working on soon-to-be-released administered employment arbitration rules, and a workplace disputes programs. “There is also an active committee currently revising CPR’s Employment-Related Mass Claims Protocol,” he said.  The release of these projects will be announced at www.cpradr.org and on social media.

Warshaw then introduced the panel moderator, Arthur Pearlstein, who is Director of Arbitration for the Federal Mediation & Conciliation Service, a Washington, D.C.-based independent agency whose mission is to preserve and promote labor-management peace and cooperation. He also directs FMCS’s Office of Shared Neutrals and has previously served as the agency’s general counsel.

Pearlstein opened the conversation stating that “Joe Biden and Kamala Harris ran a campaign that reflected a closer alignment with organized labor than I think we’ve seen in a very long time.”

Pearlstein pointed out the remarks made by President Biden a week ahead of the CPR program, where the president called himself a “labor guy,” and referred to labor people as “the folks that brung me to the dance.” Pearlstein, however, noted that Biden “did hasten to add, ‘There’s no reason why it’s inconsistent with business-growing either.’”

Pearlstein further said that even though it had been just a month since the inauguration at the time of the panel discussion, already dramatic steps had been taken.  He cited the firing of the National Labor Relations Board’s general counsel.

The president has also issued a number of executive orders and halted some regulations. “He definitely wants to be seen as a champion of worker rights,” said Pearlstein.

Pearlstein added that Biden backs “the most significant piece of labor legislation since perhaps Taft-Hartley Act in 1947, . . . the PRO Act, that would dramatically change the landscape in the labor relations world in a way that’s very favorable to unions.” See Mark Kantor, “House Passes ‘PRO’ Act, Which Includes Arbitration Restrictions,” CPR Speaks (March 10) (available at https://bit.ly/38u5w87).

Biden also supports the FAIR Act which, if passed, could end mandatory employment arbitration, said Pearlstein, adding that Covid-19 in the workplace and the rights of gig workers are also important administration considerations. See Mark Kantor, “House Reintroduces a Proposal to Restrict Arbitration at a ‘Justice Restored’ Hearing,” CPR Speaks (Feb. 12) (available at http://bit.ly/3rze7y1).

Pearlstein introduced the panelists.

  • Mark Gaston Pearce is a Visiting Professor and Executive Director of the Georgetown University Law Center Workers’ Rights Institute. Formerly a two-term board member and chairman of the National Labor Relations Board, Pearce previously taught at Cornell University’s School of Industrial and Labor Relations.
  • Kathryn Siegel is a shareholder in Littler Mendelsohn’s Chicago office, representing employers in matters of both employment law and labor relations before federal and state courts and federal agencies like the NLRB and the Equal Employment Opportunity Commission, as well as state agencies.

Mark Kantor started off the conversation by focusing on two general areas:

a) the prospects for legislative change in the Congress for arbitration of employment and labor issues; and

b) the prospects for regulatory measures by independent or executive agencies in the absence of new legislation.

Kantor pointed out that the Forced Arbitration Injustice Repeal (FAIR) Act was reintroduced in the House and the Senate. The House Committee on the Judiciary held a hearing on the matter on Feb. 11.

He noted that, in the previous Congress, the legislation passed the House of Representatives by a 225-186 vote–all Democrats plus two Republicans. When it reached the Senate, however, “it went nowhere,” he said. “Not surprising,” he said, under Republican control, “There were no hearings, there were no committee markups, no committee activity, and the FAIR Act certainly never reached the floor of the Senate.”

In the current Congress, however, he noted, “We can expect the FAIR Act to pass the House of Representatives again, and then go to the Senate. Matters in the Senate might be a little different than they were in the last Congress. We can . . . expect committee activity, hearings, possibly a markup, maybe getting the legislation to the floor of the Senate.”

He said that Senate floor challenges exist for the legislation, because substantive measures are subject to a filibuster. Overcoming a filibuster requires 60 votes.

He added that Republicans are united in their opposition to the FAIR Act as it currently stands. Moreover, trying to avoid the filibuster by altering Senate rules to eliminate the filibuster runs into the problem that there are at least two Democratic Senators who will oppose that: Sen. Joe Manchin, from West Virginia, and Sen. Kyrsten Sinema from Arizona. Therefore, he said, “overriding a filibuster seems highly unlikely.”

A way to avoid the filibuster is budget reconciliation, said Kantor, which is the route that was  taken for the Covid-19 stimulus legislation. He noted, however, that the FAIR Act’s anti-arbitration provisions are unlikely to fall within the scope of budget reconciliation. He further explained:

That means there are very few formal ways to avoid the filibuster. Some people have suggested that Vice President Harris might simply override a parliamentary ruling that the legislation is outside the scope of budget reconciliation. That is also not likely to go anywhere, because Senators Manchin and Sinema will not support that. Consequently, you don’t have 50 votes out of the Democrats and you’re certainly not going to get any Republican votes to reach the threshold to allow Vice President Harris to make that decision.

Kantor then noted that there could still be other prospects for passage:

  1. Appending the FAIR Act or other legislation to a “must pass” piece of legislation:  “That’s exactly how restrictions on arbitration for consumer finance and securities arbitration, and whistleblower protections, was passed as part of the Dodd-Frank Act [in 2010], which did get 60 votes in support, because it was ‘must pass’ legislation,” he said.

  2. Narrow legislation: Kantor noted that during the Feb. 11 hearing, “the ranking minority member of the House Judiciary Committee, Rep. [Ken Buck, a Republican] from Colorado, did signal an interest in supporting two narrow areas of restriction. One was for sexual harassment and racial discrimination, and the other was to override non-disclosure agreements for those two types of disputes.” Kantor added that Buck’s support sends a signal that Republicans on the Senate side also may be “open to focus targeted legislation, aiming at those two narrow areas.”

Kantor also pointed out that a provision in the National Defense Appropriations Act, which is renewed annually, “prohibits mandatory pre-dispute arbitration for sexual harassment and Title VII claims under procurement contracts in the national defense area and subcontracts for those procurements. That is not controversial in the national defense contracting community.”

But the bottom line here, he said, is that the filibuster will determine whether the FAIR Act or any of the other pieces of legislation like the PRO Act, which contain restrictions on pre-dispute arbitration for employment and labor, have a chance of Senate passage.

On regulatory measures, Kantor pointed out that the 2018 U.S. Supreme Court Epic Systems Corp. v. Lewis decision “set a very high barrier to utilizing preexisting general statutory authority for administrative agencies, independent, or executive agencies. It said that in order to prevail, the claim must show ‘clear and manifest’ intention to displace the Federal Arbitration Act.”

He continued: “Congress would be expected to have specifically addressed preexisting law, such as the Federal Arbitration Act. That meant ‘no’ for the [Fair Labor Standards Act], ‘no’ for the [National Labor Relations Act], and in subsequent court decisions, also ‘no’ for Title VII, [the Americans with Disabilities Act], [and the Age Discrimination in Employment] arguments.”

As a result, he added, one “can’t generally rely on pre-existing labor relations legislation to override mandatory pre-dispute arbitration agreements.” But Kantor provided two possible avenues agencies could explore in order to not run into an Epic Systems problem. He explained:

One is that you could avoid Epic Systems by focusing on the prohibition of class procedures, and prohibiting a prohibition of class procedures in any forum–that would be litigation and arbitration, and therefore would be nondiscriminatory. Indeed, the Epic Systems decision says, in essence, the Federal Arbitration Act sets up a nondiscrimination approach to whether or not other acts can be utilized to prevent arbitration. If it’s focused only on a fundamental attribute of arbitration, then there might be conflict preemption by the FAA. On the other hand, if it spreads more generally, there might not be.

The second avenue would be to look at nondisclosure agreements as Rep. Buck mentioned during the Feb. 11 hearing. Kantor added that the FAIR Act covers employment, civil rights, class action, antitrust legislation, and consumer disputes. If passed, it would also prohibit pre-dispute joint-action waivers of those disputes in any forum.

* * *

Mark Gaston Pearce’s highlights focused on what is to be expected from the National Labor Relations Board with the Biden Administration.

Pearce started off with a focus on the composition of the five-member NLRB. by pointing out that even though Biden is in office, the majority of the NLRB is still Republican appointees, and that this will not change until August 2021.

He then discussed some of the NLRB cases. “There is a lot to be undone by the Trump board since the Trump board did a whole lot of undoing itself,” he said. He explained: “Among those things that the Trump board did was weakening the election reforms that were made in 2015,” said Pearce.

He explained that the Trump board changed union election rules by providing employers an increased ability to challenge and litigate certain issues prior to the election, and increased the length of time between the filing of a petition and the election date. “They were mandating that there should be a certain minimum time period to pass before an election,” he said.

Moreover, the Trump Board “lengthened the time period for an employer to serve a voter list and lengthened the time period for which an election is to be held if there was going to be a challenge to the [NLRB] Regional Director’s decision,” he said. [Among other things, Regional Directors are empowered to administer union elections.  See the NLRB’s Organization and Functions, Sec. 203.1 (available at https://bit.ly/3ls48Ij.]

Pearce explained, “All of those provisions and a few more were struck by a [federal] district court judge once [they] went into effect. The basis for . . . striking . . . those provisions was that the board had determined that these actions were strictly procedural, and therefore under the . . . Administrative Procedure Act, they were not obliged to go through the full notice and comment requirements.” The district court decision, however, has been appealed and it is currently pending before the D.C. Circuit Court of Appeals, he said.

Pearce added that it is unlikely a decision will be issued before a new majority is in place. He noted that “it’s very likely that a new majority will withdraw that appeal and those provisions of the new rule will never see the light of the day.”

Pearce said MV Transportation standards–from a 2019 NLRB decision on whether an employer’s unilateral action is permitted by a collective-bargaining agreement—will affect  arbitrators. In the case, he explained, the NLRB abandoned a standard requiring the employer to bargain over any material changes to a mandatory subject of bargaining unless the union gave a “clear and unmistakable waiver” of its right to bargain on the changes. The new standard is based on the “contract coverage.”

The “clear and unmistakable waiver” standard, Pearce explained, generally hindered an employer’s ability to make changes, so instead the board adopted the broader contract coverage standard for determining whether unionized employers’ unilateral change in terms and conditions of employment violated the National Labor Relations Act.

Pearce predicted that “MV Transportation will be revisited because the outgrowth . . . has been that unions, fearing that their position would be waived, are negotiating contracts with so many provisos or are likely to negotiate contracts with so many provisos in it that contract negotiations have become fairly untenable.”

He noted, however, that “with respect to arbitrators, there was always going to be an issue of whether or not, in fact, there is truly a contract coverage for the change that is being proposed,  and I don’t think parties are going to want to constantly go to arbitration over every little thing that they plan on doing.”

Pearce then discussed recent developments in the area of higher education. He noted that there was a proposed rule that graduate students not be considered as employees under the National Labor Relations Act. He added, however, that it was unlikely for that rule to be adopted as the majority will likely object to such status. He said he predicts that there is going to be an “increase in petitions filed for graduate student bargaining units in the universities.”

“On the other hand,” Pearce explained, “[Last year’s NLRB decision] Bethany College, which reversed [a 2013 board decision,] Pacific Lutheran, . . . has resulted in a policy that has emanated from the courts that religious universities do not have to show much to consider themselves to have a religious bent and direction and therefore exclude faculty from being able to unionize.”

He directed attendees to the recent NLRB General Motors decision. “General Motors changed the standards with respect to offensive speech . . . during the course of protected concerted activity,” he said. Pearce added that cases involving sexist and racist remarks set on the picket line is an area that should not have received protections under the NLRA, though he said he backed the board’s decision in the case.

* * *

Antranik Chekemian is a second-year student at New York’s Benjamin N. Cardozo School of Law, is a CPR 2021 intern.

* * *

You can read the rest of Antranik Chekemian’s report on the CPR seminar at Part II: More on Workplace ADR Under the Biden Administration (April 19), and Part III: Deference Change–Analysis of a Shift on a Labor Arbitration Review Standard (April 26).

[END]

House Passes ‘PRO’ Act, Which Includes Arbitration Restrictions

By Mark Kantor

Yesterday, the proposed Protecting the Right to Organize Act (PRO Act) passed the U.S. House of Representatives by a 225-206 vote, with five Republicans voting Yay and one Democrat voting Nay.  The bill was sent to the U.S. Senate for consideration. 

While much arbitration-related attention in the new Congress has focused on the arbitration-only FAIR Act (for details and links, see Mark Kantor, “House Reintroduces a Proposal to Restrict Arbitration at a ‘Justice Restored’ Hearing,” CPR Speaks (Feb. 12) (available at http://bit.ly/3rze7y1)), the PRO Act contains significant provisions that, if finally enacted, would limit employment arbitration.

Most important, the PRO Act would make it an unfair labor practice for an employer to prevent employees requiring arbitration agreements that obligate an employee “not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee in any forum that, but for such agreement, is of competent jurisdiction.” 

Note that the coverage of the proposed PRO Act encompasses both employment contracts of adhesion and individually negotiated employment contracts, as well as covering individual independent contractors.  See Section 101(b) of the legislation at the act’s link above.

Section 104 of the PRO Act would override Epic Systems v. Lewis,138 S. Ct. 1612 (May 21)(available at https://bit.ly/2rWzAE8), with respect to employment arbitration and class proceedings. 

According to the accompanying section-by-section analysis released by the House, “ . . .  on May 21, 2018, the Supreme Court held in Epic Systems Corp. v. Lewis that … employers may force workers into signing arbitration agreements that waive the right to pursue work-related litigation jointly, collectively or in a class action. This section overturns that decision by explicitly stating that employers may not require employees to waive their right to collective and class action litigation, without regard to union status.”  (The analysis is available at https://bit.ly/2OGrKNj).

The ultimate Senate fate of the PRO Act is linked to the fate of the filibuster.  As Politico states:

But the Protecting the Right to Organize Act, which advanced mostly along party lines, is unlikely to win the 60 votes needed for passage in the narrowly controlled Senate. And already, some union leaders — who hold outsize sway in the Biden administration — are amping up pressure on Democrats to eliminate the filibuster so they can see one of their top priorities enacted.

Eleanor Mueller and Sarah Ferris, “House passes labor overhaul, pitting unions against the filibuster,” Politico (March 9) (available at http://politi.co/3vbgFEu). For the latest on the limited prospects for overturning the filibuster in the Senate, see Burgess Everett, “Anti-filibuster liberals face a Senate math problem,” Politico (March 9) (available at http://politi.co/2ObVou0). 

The filibuster affects large swaths of proposed legislation coming out of the House of Representatives and the Biden Administration agenda. We can anticipate daily media attention to every word any member of Congress or the administration speaks about the topic for some time to come.

The operative PRO Act text in Sec. 104 overriding Epic Systems reads as follows:

(e) Notwithstanding chapter 1 of title 9, United States Code (commonly known as the ‘Federal Arbitration Act’), or any other provision of law, it shall be an unfair labor practice under subsection (a)(1) for any employer—

“(1) to enter into or attempt to enforce any agreement, express or implied, whereby prior to a dispute to which the agreement applies, an employee undertakes or promises not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee in any forum that, but for such agreement, is of competent jurisdiction;

“(2) to coerce an employee into undertaking or promising not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee; or

“(3) to retaliate or threaten to retaliate against an employee for refusing to undertake or promise not to pursue, bring, join, litigate, or support any kind of joint, class, or collective claim arising from or relating to the employment of such employee: Provided, That any agreement that violates this subsection or results from a violation of this subsection shall be to such extent unenforceable and void: Provided further, That this subsection shall not apply to any agreement embodied in or expressly permitted by a contract between an employer and a labor organization.”;

Also, according to the proposal’s section-by-section analysis, PRO Act Section 109(c) would create a private right of action in U.S. federal court if the NLRB fails to pursue a retaliation claim.

(c) Private right to civil action.  If the NLRB does not seek an injunction to protect an employee within 60 days of filing a charge for retaliation against the employee’s right to join a union or engage in protected activity, that employee may bring a  civil  action  in  federal  district  court. The  district  court  may  award  relief  available  to employees who file a charge before the NLRB.

Yesterday’s hearings have gone viral via fiery words backing the act’s passage by Tim Ryan, D., Ohio, who chided Republicans for failing to support workers.  “Heaven forbid we pass something that’s going to help the damn workers in the United States of America!” shouted Ryan in the House chambers, adding, “Heaven forbid we tilt the balance that has been going in the wrong direction for 50 years!”

Republican opponents immediately fired back, saying that the bill would hurt workers by hurting business and the economy. For details, see Katie Shepherd, “Tim Ryan berates GOP over labor bill: ‘Stop talking about Dr. Seuss and start working with us,’” Washington Post (March 10) (available at http://wapo.st/3bz2YaF).

* * *

Mark Kantor is a member of CPR-DR’s Panels of Distinguished Neutrals. Until he retired from Milbank, Tweed, Hadley & McCloy, he was a partner in the firm’s Corporate and Project Finance Groups. He currently serves as an arbitrator and mediator. He teaches as an Adjunct Professor at the Georgetown University Law Center (Recipient, Fahy Award for Outstanding Adjunct Professor). He also is Editor-in-Chief of the online journal Transnational Dispute Management. He is a frequent contributor to CPR Speaks, and this post originally was circulated to a private list serv and adapted with the author’s permission. Alternatives editor Russ Bleemer contributed to the research.

[END]

New California Law Prohibits Pre-Dispute Employment Arbitration Agreements

By Andrew Garcia

California last week enacted a new law that prohibits employers from requiring job applicants, or any existing employee, to enter into pre-dispute arbitration agreements as a condition of employment.

California Gov. Gavin Newsom signed the bill into law Oct. 10. It also criminalizes any retaliation against an employee who refuses to enter into a pre-dispute arbitration agreement.

Assembly Bill 5, introduced by Assemblywoman Lorena Gonzalez, D., San Diego, says that a violation of the amended California Labor Code is a misdemeanor. Despite the law’s harsh prescriptions for violators, the bill clarifies that it does not purport to invalidate any existing arbitration agreement that is consistent with the Federal Arbitration Act.

The California Chamber of Commerce identified AB 51 as a “job killer.” (See the chamber’s press release ahead of the first major hearing on the bill in March at http://bit.ly/2pmYYEu.)  The chamber said that the new law conflicts with the U.S. Supreme Court’s decision in Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S.Ct. 1421 (2017), among many cited cases that it notes are part of the Supreme Court’s jurisprudence favoring arbitration agreements. The chamber predicts that the law will be challenged and overturned, preempted by federal law. (You can read the chamber’s statement in opposition to the California Legislature, joined by 41 local chamber and specialized industry groups, at http://bit.ly/33zTLIz.)

As other jurisdictions wrestle with local restrictions, courts are beginning to see challenges.  A New York federal court last spring stuck down a New York state pre-dispute mandatory arbitration bar in a decision that was mirrored by the California Chamber’s view. See Latif v. Morgan Stanley & Co. LLC, No. 18-cv-11528, 2019 WL 2610985 (S.D.N.Y. June 26, 2019), where the U.S. District Court held that a newly enacted New York state law that invalidated pre-dispute employment arbitration agreements was preempted by the Federal Arbitration Act. See also, Andrew Garcia, “Update: Legislatures on Invalidating Pre-Dispute Arbitration Agreements,” CPR Speaks blog (Aug. 1) (available at http://bit.ly/2IPg6dd).

AB 51 is one of three bills signed by Gov. Newsom, a Democrat who took office in January, that expanded California’s workplace protection laws.  “Work is about more than earning an income,” he stated, adding, “For many, a job can provide a sense of purpose and belonging–the satisfaction of knowing your labor provides value to the world. Everyone should have the ability to feel that pride in what they do, but for too many workers, they aren’t provided the dignity, respect or safety they deserve. These laws will help change that.”

That move is a big change from Newsom’s predecessor. The new law is a reintroduction of an identical 2018 bill that was vetoed by then-Gov. Jerry Brown, also a Democrat–the second time Brown vetoed legislation restricting arbitration.  The California Chamber of Commerce opposition letter quotes Brown’s 2018 veto extensively, including the Kindred Nursing decision, which noted, “A rule selectively finding arbitration contracts invalid because improperly formed fares no better under the [Federal Arbitration Act] than a rule selectively refusing to enforce those agreements once properly made. Precedent confirms that point.”

An August California court decision, however, shares the new law’s skeptical arbitration view. In OTO LLC v. Kho, 447 P.3d 680 (Cal. 2019) (available at https://stanford.io/2ON8f3x), the California Supreme Court rejected the validity of an arbitration agreement because, among other reasons, the defendant required plaintiff Kho to sign the agreement as a condition of his employment.

The court found that the porter who delivered the agreement remained at Kho’s place of work until he signed the agreement, which created an impression that he had to sign it immediately. Therefore, the court ruled that since Kho had no choice but to sign the arbitration agreement or lose his job without an opportunity to review the agreement in his native language, it could not be enforced.

To view the bill in its entirety, click here.

The author, a Summer and Fall 2019 CPR Institute intern, is a law student at Brooklyn Law School.

 

 

Gov Cuomo Signs New Legislation Barring Use of Mandatory Arbitration to Resolve Workplace Discrimination and Harassment in New York State

By Anna Hershenberg

As expected, on Monday, August 12, 2019, Governor Cuomo signed new legislation that, among other things, purports to bar the use of mandatory arbitration to resolve discrimination and harassment cases in the workplace in New York state.

The prior version of this law, New York CPLR § 7515, which went into effect last year, aimed to prohibit mandatory arbitration of workplace sexual harassment claims only; this version expands the prohibition to claims of other types of discrimination.

In June, Judge Denise Cote (SDNY) found the prior version of  § 7515 to be preempted by the Federal Arbitration Act and therefore invalid. (Latif v. Morgan Stanley & Co. LLC et al. (S.D.N.Y. 2019) (available at http://bit.ly/2y9w6AL)) Her ruling should apply with equal force to the amended version of § 7515, at least with respect to interstate matters.

CPR covered this issue earlier this month on CPRSpeaks:

https://blog.cpradr.org/2019/08/01/update-legislatures-on-invalidating-pre-dispute-arbitration-agreements/

The full text of the newly enacted § 7515 is pasted below (revisions in blue).

Section 7515: Mandatory arbitration clauses; prohibited

(a) Definitions. As used in this section:

1. The term “employer” shall have the same meaning as provided in subdivision five of section two hundred ninety-two of the executive law.

2. The term “prohibited clause” shall mean any clause or provision in any contract which requires as a condition of the enforcement of the contract or obtaining remedies under the contract that the parties submit to mandatory arbitration to resolve any allegation or claim of an unlawful discriminatory practice of sexual harassment. discrimination, in violation of laws prohibiting discrimination, including but not limited to, article fifteen of the executive law.

3. The term “mandatory arbitration clause” shall mean a term or provision contained in a written contract which requires the parties to such contract to submit any matter thereafter arising under such contract to arbitration prior to the commencement of any legal action to enforce the provisions of such contract and which also further provides language to the effect that the facts found or determination made by the arbitrator or panel of arbitrators in its application to a party alleging an unlawful discriminatory practice based on sexual harassment in violation of laws prohibiting discrimination, including but not limited to, article fifteen of the executive law shall be final and not subject to independent court review.

4. The term “arbitration” shall mean the use of a decision making forum conducted by an arbitrator or panel of arbitrators within the meaning and subject to the provisions of article seventy-five of the civil practice law and rules.

(b) (i) Prohibition. Except where inconsistent with federal law, no written contract, entered into on or after the effective date of this section shall contain a prohibited clause as defined in paragraph two of subdivision (a) of this section.

(ii) Exceptions. Nothing contained in this section shall be construed to impair or prohibit an employer from incorporating a non-prohibited clause or other mandatory arbitration provision within such contract, that the parties agree upon.

(iii) Mandatory arbitration clause null and void. Except where inconsistent with federal law, the provisions of such prohibited clause as defined in paragraph two of subdivision (a) of this section shall be null and void. The inclusion of such clause in a written contract shall not serve to impair the enforceability of any other provision of such contract.

(c) Where there is a conflict between any collective bargaining agreement and this section, such agreement shall be controlling.

Anna Hershenberg is CPR’s Vice President of Programs and Public Policy

Update: Legislatures on Invalidating Pre-Dispute Arbitration Agreements

By Andrew Garcia

A federal court has slowed the momentum by legislatures—in this case, New York state’s—to bar arbitration in employment cases. A New York U.S. District Court judge has struck down the application of a recent state law which allowed employees to avoid mandatory pre-dispute employment agreements to arbitrate sexual harassment claims.

The statute at issue, NYCPLR § 7515, originally passed and signed into law a year ago, aimed to void arbitration clauses in employment contracts that require the use of arbitration proceedings to resolve workplace sexual harassment claims in New York state. In June, the New York Senate and Assembly passed amendments to § 7515 that expanded this prohibition to agreements that sought to arbitrate all workplace discrimination claims.

This year’s bill, awaiting Gov. Andrew Cuomo’s expected signature (see http://bit.ly/2SKnH0c), was a victory for lawmakers like the sponsor, State Democratic Senator Alessandra Biaggi. (She wrote on Twitter on June 19: “6 months & 2 public hearings later, we passed #BiaggiBill S6577 to expand protections for survivors, & hold New York employers, agencies, & organizations liable for all forms of workplace sexual harassment and discrimination.” See @SenatorBiaggi.)

But any victories may be short-lived. A federal court found that the currently enacted version of § 7515 was preempted by the Federal Arbitration Act and therefore invalid about a week after the amendments passed both New York houses.

On June 26, U.S. District Court Judge Denise Cote issued an opinion that deemed a recently modified New York State law preempted by the Federal Arbitration Act.  Latif v. Morgan Stanley & Co. LLC et al., No. 18cv11528 – Document 52 (S.D.N.Y. 2019) (available at http://bit.ly/2y9w6AL). In Latif, the plaintiff filed a suit against his employer, alleging discrimination and sexual assault claims. At the beginning of his employment, Latif signed an offer letter that incorporated by reference Morgan Stanley’s CARE Arbitration Program Arbitration Agreement.

Judge Cote found that the application of § 7515 to invalidate the parties’ agreement to arbitrate Latif’s claims would be inconsistent with the FAA. The opinion states that § 7515 does not displace the FAA’s presumption that arbitration agreements are enforceable. Judge Cote did not address the viability of § 7515 in purely an intrastate matter where the FAA would not be implicated.

The recently passed amendments to § 7515 are part of a growing trend in state and federal legislatures to pass laws that ban pre-dispute arbitration agreements for sexual harassment claims and more. In 2018, the Maryland legislature passed the Disclosing Sexual Harassment in the Workplace Act, which prohibited employers from enforcing arbitration agreements for sexual harassment or retaliation claims. In Vermont, the legislature passed “An Act Relating to the Prevention of Sexual Harassment,”  which prohibited agreements that prevent an employee from filing a sexual harassment claim in court.

The states have moved faster than Congress, but there is no shortage of proposals at the federal level. In the current session, there have been at least 11 new bills introduced to amend the FAA, the Fair Labor Standards Act, or the National Labor Relations Act to prohibit most employment and consumer pre-dispute arbitration agreements.

Table 1: 116th Legislative Session Bills Pertaining to Arbitration (Senate = S; House = HR)

Bill Name Bill Number Sponsors Current Status
Forced Arbitration Injustice Repeal (FAIR) Act S. 610 Sen. Richard Blumenthal, D., Conn. 2/28/19: Introduced
H.R. 1423 Rep. Hank Johnson, D., Ga. 4/8/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Bringing an End to Harassment by Enhancing Accountability and Rejecting Discrimination (BE HEARD) in the Workplace Act S. 1082 Sen. Patty Murray, D. Wash. 4/9/19: Introduced
H.R. 2148 Rep. Katherine Clark, D. Mass. 5/3/19: Referred to the Subcommittee on the Constitution Civil Rights, and Civil Liberties
Restoring Justice for Workers Act S. 1491 Sen. Patty Murray D., Wash. 5/15/19: Introduced and referred to the Committee on Health, Education, Labor, and Pensions.
H.R. 2749 Rep. Jerrold Nadler, D., N.Y. 6/26/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Ending Forced Arbitration of Sexual Harassment Act H.R. 1443 Rep. Cheri Bustos, D. Ill. 4/8/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Restoring Statutory Rights and Interests of the States Act S. 635 Sen. Patrick Leahy, D., Vt. 2/28/19: Introduced
Preventing Risky Operations from Threatening the Education and Career Trajectories of (PROTECT) Students Act S. 867 Sen. Margaret Wood Hassan, D. N.H. 3/26/19: Referred to the Committee on Health, Education, Labor, and Pensions
Court Legal Access and Student Support (CLASS) Act S. 608 Sen. Richard Durbin, D., Ill. 2/28/19: Referred to the Committee on Health, Education, Labor, and Pensions
H.R. 1430 Rep. Maxine Waters, D. Calif. 4/8/19: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law
Safety Over Arbitration Act S. 620 Sen. Sheldon Whitehouse, D., R.I. 2/28/19: Referred to the Committee on the Judiciary
Arbitration Fairness for Consumers Act S. 630 Sen. Sherrod Brown, D., Ohio 2/28/19: Referred to the Committee on Banking, Housing, and Urban Affairs
Justice for Servicemembers Act H.R. 2750 Rep. David Cicilline, D. R.I. 6/26/2019: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law

 

Ending Forced Arbitration for Victims of Data Breaches Act H.R. 327 Rep. Ted Lieu, D. Calif. 1/25/19: Referred to the Subcommittee on Consumer Protection and Commerce

The bill with the most co-sponsors (215 House members and 34 Senators) and the most prominent media coverage is the Forced Arbitration Injustice Repeal (FAIR) Act, which would ban pre-dispute arbitration in employment, consumer, antitrust, and civil rights disputes. Introduced in both the House and the Senate, the FAIR Act was recently referred to the House Subcommittee on Antitrust, Commercial, and Administrative Law.

Another bill with growing support (96 House members and 18 Senators co-sponsoring) is the Bringing an End to Harassment by Enhancing Accountability and Rejecting Discrimination (BE HEARD) in the Workplace Act. The BE HEARD in the Workplace Act bans all pre-dispute arbitration agreements that require arbitration of a work dispute, and all post-dispute arbitration agreements where an employee’s consent was coerced, or if the agreement was not in sufficiently plain language likely to be understood by the average worker.

The BE HEARD in the Workplace Act would also amend the NLRA to expand “Unfair Labor Practices” to situations where an employer enters into or attempts to enforce any agreement that prevents litigation, or support of joint, class, or collective claims arising from or relating to the employment of a worker, coerces the worker to enter into such an agreement, and retaliates against a worker for refusing to enter into such an agreement. The House bill, sponsored by Rep. Katherine Clark, D., Mass., is currently in the Subcommittee on the Constitution, Civil Rights, and Civil Liberties.

Another key bill, with 48 members of the House and 18 Senators co-sponsoring, is the Restoring Justice for Workers Act. This bill would amend the NLRA to prohibit pre-dispute arbitration agreements that require arbitration of work disputes, retaliation against workers for refusing to enter into arbitration agreements and ensure that post-dispute arbitration agreements are “truly voluntary.” The House bill, sponsored by Rep. Jerrold Nadler, D., is currently in the Subcommittee on Antitrust, Commercial, and Administrative Law.

The Latif holding that the FAA preempts § 7515 might push federal and state lawmakers to accelerate the momentum of the pending federal legislation. Judge Cote in Latif notes that the law already had been cited by the U.S. Supreme Court, in dissent, as an example of state action that seeks to protect workers’ ability to bring sexual harassment suits in court in the wake of other top court decisions backing employment arbitration. See Lamps Plus v. Varela, 139 S. Ct. 1407, 1422 (2019) (Ginsburg, J., dissenting) (available at http://bit.ly/2GxwFbC).

Although legislation that has sought to ban fully pre-dispute arbitration agreements has not been successful, this could change given the political landscape and outcome of the 2020 election.

The author, a Summer 2019 CPR Institute intern, is a law student at Brooklyn Law School.

 

 

Workplace Mandatory Arb Ban Reversed by Kentucky Lawmakers

By Vincent Sauvet

Kentucky has re-authorized the use of mandatory arbitration in employment contracts less than five months after the state’s top Court declared the agreements void.

For a short time, Kentucky was the only state prohibiting the mandatory arbitration of employment disputes. Its legislature has now brought the Commonwealth back into the flock with Senate Bill 7.

In a unanimous 2018 decision, the Kentucky Supreme Court held that the state’s Revised Statutes § 336.700(2) prohibited employers from conditioning employment on an existing employee’s or prospective employee’s agreement to “waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit to which the employee or person seeking employment would otherwise be entitled.” N. Ky. Area Dev. Dist. v. Snyder, No. 2017-SC-000277-DG, 2018 Ky. LEXIS 363 (Sep. 27, 2018) (available at http://bit.ly/2HmZp8B) (quoting the statute, which is available in full in the opinion).

While the Snyder ruling made Kentucky the nation’s first state to prohibit mandatory employee arbitration agreements, it didn’t last long. With Senate Bill 7, sponsored by state Senate President Robert Stivers, Kentucky reinstated the use of mandatory arbitration in employment contracts,  rendering such agreements enforceable. The provisions of Senate Bill 7 are to be applied retroactively and prospectively.

The bill was signed by Kentucky Gov. Matt Belvin on March 25. The bill passed in the Senate the day before following a 25-11 vote, and a 51-45 vote in the House a day earlier. Save for a few Republicans voting against the bill–eight in the House and three in the Senate–both votes showed a partisan split, with majority Republicans voting for the measure and the Democratic minority voting against (one House Democrat joined 50 Republican colleagues in approving the measure). The bill also had strong support from the Kentucky Chamber of Commerce, the Kentucky League of Cities and numerous other employer and business groups.

This move happens in a context of long-running disagreement over the question of arbitration in nursing home care agreements between the Kentucky Supreme Court and the U.S. Supreme Court. In that dispute, the nation’s top Court set down the law, but the Kentucky Court managed to get in the last word and squash an arbitration agreement.

In Kindred, the Kentucky Supreme Court refused to enforce arbitration agreements signed on behalf of two nursing home residents on the ground that since the right to a trial by jury was “constitutionally sacred” and “inviolate,” the holder of a non-specific power of attorney was barred from entering any agreement on behalf of a principal that would forfeit that right to a jury trial, such as an arbitration agreement.

The U.S. Supreme Court held that the Federal Arbitration Act  “preempts any statute rule discriminating on its face against arbitration” and “displaces any rule that covertly accomplished the same objective by disfavoring contracts that have the defining features of arbitration agreements.” It reversed the Kentucky decision in Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017) (available at http://bit.ly/2JAWZ7Q).

But in the decision, the U.S. Supreme Court remanded one of the Kindred combined cases for further consideration to examine whether a power of attorney contract was broad enough to allow the attorney to enter into an arbitration agreement on behalf of a nursing home resident.

On remand, the Kentucky Supreme Court stuck to its view that the power of attorney didn’t allow the attorney to make the arbitration agreement, and it upheld its original determination striking arbitration. Kindred Nursing Ctrs. Ltd. P’ship v. Wellner, No. 2013-SC-000431-I (Ky. S.Ct. corrected Nov. 22, 2017) (available at http://bit.ly/2Q3k18A)).

In its first week of the current term last October, the U.S. Supreme Court denied the nursing home’s request to review the case, so it won’t be heard in Washington a second time. That leaves a narrow standard related to powers of attorney that could void an arbitration agreement in Kentucky.

But the broader Snyder decision went directly against the Kindred holding, as well as last year’s Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) (available at http://bit.ly/2Y66dwK), which permitted mandatory pre-dispute arbitration agreements as a condition of employment.  Snyder therefore was likely to constitute the start of another counterattack on the Kentucky Supreme Court’s arbitration agreement jurisprudence.

Instead, the Kentucky legislature decided to take the matter into its own hands.  The new law now ensures that Snyder is nothing more than a one-off.

* * *

The author was a CPR Institute Spring 2019 intern.