Is the Future of Arbitration at Risk?

The recent passage of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2022 (also known as the #MeToo bill) has shifted the landscape of mandatory arbitration. Although the #MeToo bill is very specific as to what types of claims are barred from mandatory arbitration, a much broader bill was passed by the House of Representatives on March 17, 2022, that calls into question the future of arbitration. The Forced Arbitration Injustice Repeal Act of 2022 (“The FAIR Act”), if passed by the Senate, would end the ability to utilize pre-dispute arbitration agreements in employment, consumer, antitrust and civil right disputes. 

The FAIR Act’s Second Introduction
The FAIR Act was initially introduced in the 116th Congress and passed by the House in 2021 by a vote of 225 to 186. However, the bill subsequently failed to pass in the Senate. The bipartisan support for the #MeToo bill provided momentum for the reintroduction of the FAIR Act in the 117th Congress. The House passed the bill largely along party lines with a vote of 222 to 209. The bill moved on to the Senate on March 21, 2022, and was referred to the Committee on the Judiciary. No further action has been noted since the bill’s referral.

Effect on Texas Option Plans
What effect would the passage of the FAIR Act have on the ability of a Texas Option employer to compel arbitration for a negligence claim arising out of a workplace injury? The cornerstone of the effect of the FAIR Act lies in the definition of an “employment dispute.” In part, an “employment dispute” is defined in the bill as a “dispute between one or more individuals (or their authorized representative) and a person arising out of or related to the work relationship or prospective work relationship between them…” By virtue of this definition, an employer would not only be prohibited from mandating arbitration in discrimination and wage and hour claims, but a Texas Option employer also would lose the ability to mandate arbitration as a means to resolve disputes related to the cause of an occupational injury. While certainly not ideal, it’s important to note that there are options available.

Possibility of Passage
Without a crystal ball, it is hard to say if the FAIR Act will pass in the Senate. The bipartisan support of the #MeToo bill is not necessarily indicative of how the Senate will vote: The FAIR Act goes far beyond the #MeToo bill and would have far-reaching implications for the Federal Arbitration Act, if passed. The breadth of the ban on mandatory arbitration that would occur should the bill pass would lead one to believe that the Senate, like the House, would vote along party lines and defeat its passage. The wild card will be the votes cast by the two independents in the Senate. Also, should the vote be delayed until November, the outcome of the midterm elections will impact the future of the bill.

Stay the Course – and Stay Prepared
Although the use of arbitration is considered to be an integral component of an Option program, there are certainly alternatives an employer can incorporate into its program to continue to effectively manage disputes. After all, the use of arbitration is not to give an employer a leg up in litigation, but rather to level the playing field and ensure that the process is fair for both parties.

Many employers already have the option to remove a case to federal court and do so in lieu of compelling arbitration. Federal court has generally shown itself to be a fair forum for both parties without the costs associated with arbitration. Additionally, the Texas Supreme Court has held that the use of a contractual jury waiver is permissible and enforceable, as long as the waiver is entered into knowingly and voluntarily. 

The FAIR Act does not prohibit arbitration as a whole, and it does not prevent an employer and employee from agreeing to arbitrate. While some may question whether employees are going to agree to arbitrate rather than present their case to a jury, it may be surprising to know that employees agree to arbitration for myriad reasons, such as privacy, elimination of the ability to appeal, reduced discovery, or because they feel their circumstances may present better to an arbitrator than a jury. These are just a few of the available considerations. In the event the FAIR Act becomes law, your PartnerSource team leaders will walk clients through all options to help determine the best alternative for that client’s program.

Keep in mind that the Texas Supreme Court continues to issue favorable opinions in support of arbitration, as reflected in the most recent opinions In re Whataburger Restaurants LLC, — S.W.3d —, 2022 WL (Tex. Apr. 22, 2022) [21- 0165] and Aerotek, Inc. v. Boyd, 624 S.W.3rd 199 (Tex. 2021).

The reintroduction of the FAIR Act bill reinforces the importance of being involved with the Association for Responsible Alternatives to Workers’ Compensation (“ARAWC”) and the organization’s lobbying efforts to help legislators keep top of mind the interests of Texas employers with responsible Texas Option programs. PartnerSource will continue to monitor the movement of this proposed legislation and apprise of any new developments. As always, PartnerSource team leaders are available to discuss any questions that may arise.