Yes, there are abuses, but is this the way to fix ‘em?

The writing is on the wall; Congress will pass legislation sometime in the next year or two attempting to curtail the potential for abuse of consumers and employees in so-called “mandatory” binding arbitration.

Of the numerous bills pending, a couple are of some note. The “Arbitration Fairness Act of 2007” (I guess it will be 2008 or 09) introduced in the Senate as SB 1782 and in the House as HB 3010, is the most far reaching and potentially the most damaging to the entire arbitral system. In its attempt to carve out pre-dispute arbitral agreements involving consumers, employees, and franchisees (why franchisees?) as unenforceable, it also invalidates agreements to arbitrate any “dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.” Humm…what does that mean? I hope the lobbyists for the judiciary are paying attention to this, because if it passes, there is going to be a lot of work in the courts to clarify the meaning of this last provision. In addition, the bills would erase the separability doctrine. Ouch!

There are others out there as well. Good examples of legislators responding to angry powerful constituents. For example, HB 5129, entitled the Civil Rights Act of 2008, includes a subtitle referred to as the Preservation of Civil Rights Protections Act of 2008. This subtitle provides that “any clause of any agreement between an employer and an employee that requires arbitration of a dispute arising under the Constitution or laws of the United States shall not be enforceable.” HB 5312, entitled the Automobile Arbitration Fairness Act of 2008, would disallow pre-dispute arbitration agreements in connection with the sale of automobiles. Additionally, the bill would require, at the request of any party, that any award issued include a “brief, informal discussion of the factual and legal basis for the award.”

Clearly, there have been abuses, but isn’t there a way to make arbitration a consistently fair and less expensive alternative for consumers and employees (and even franchisees) without destroying the arbitral system? Your ideas?