Groups Call for End to Forced Arbitration Clauses in Contracts

April 22, 2009

A newly formed coalition is calling on Congress to pass legislation to prohibit forced arbitration clauses that are often found in employment and consumer product contracts.

The group says it is not opposed to alternative dispute resolution procedures agreed to voluntarily by consumers or employees to settle disputes.

The goal of the Fair Arbitration Now Coalition is to pass the Arbitration Fairness Act (H.R. 1020). The group’s members include Public Citizen, the National Association of Consumer Advocates, the National Employment Lawyers Association and the American Association of Justice, the National Consumer Voice for Long-Term Care, Home Owners for Better Building and the Leadership Conference on Civil Rights.

Forced arbitration clauses are often used in employment, cell phone, credit card, retirement account, home building, nursing home and assisted living contracts. Those taking a job or buying a product or service are required to give up their right to go to court if they are harmed by a company or product.

“The Arbitration Fairness Act does not seek to eliminate arbitration and other forms of alternative dispute resolution agreed to voluntarily after a dispute arises,” the groups wrote last month in a letter to lawmakers. “Its sole aim is to end the unscrupulous business practice of forcing consumers and employees into biased arbitrations by binding them long before any disputes arise.”

The coalition is also supporting the Fairness in Nursing Home Arbitration Act (H.R. 1237 and S. 512), which would eliminate mandatory binding arbitration clauses from nursing home contracts.

Business groups generally support the clauses, claining they provide .
the average consumer, employee, and investor a way to to obtain a remedy especially for low-value claims. According to the U.S. Chamber of Commerce, plaintiffs’ lawyers are reluctant to take cases involving relatively small claims and that without the option of arbitration, consumers would be faced with trying to navigate the legal system on their own or abandoning their claim.

“These attacks on arbitration are unnecessary and would undermine a system that has benefited consumers, employees, and businesses for decades, and on which many of them now rely. Accordingly, we strongly urge you to oppose any anti-arbitration legislation or provision,” the U.S. Chamber of Commerce stated in a letter to lawmakers on the issue.

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