Arbitration Fairness Act Fact Sheet

Mandatory binding arbitration clauses are hidden in the fine print of everything from cell phone, credit card, franchise and employment agreements to nursing home care contracts. Just by taking a job or buying a product or service, consumers, employees and others are forced to give up their right to take their case to court if they are harmed by a corporation. Instead, any dispute must be decided in arbitration by an arbitrator that is usually chosen by the corporation.

Consumers are often unaware that they are signing these agreements until a company attempts to enforce them. In the case of nursing home care, corporations will force residents and their families to sign arbitration provisions in order to be admitted into the facility. While arbitration is often touted as cheaper and more efficient, that’s not always the case. Consumers can be forced to pay costly hourly fees and may have to travel at their own expense to a venue chosen by the corporation.

Corporations oppose the Arbitration Fairness Act because the system of forced arbitration allows them to escape accountability for discrimination, harassment, gross negligence, fraud, and other corporate wrongdoing. Businesses aren’t looking out for the best interests of consumers and employees; they want to protect their ability to force individuals into a system that they design. Who wouldn’t want to control the method by which claims against them are resolved?

Two bipartisan bills introduced this Congress will make sure the decision to arbitrate is made voluntarily and after a dispute has arisen, so corporations cannot manipulate the arbitration system in their favor at the expense of consumers:

• Arbitration Fairness Act of 2009 (H.R. 1020)
  • The bill would amend the Federal Arbitration Act to prevent the use of pre-dispute mandatory arbitration clauses in consumer, employment and franchise agreements. This legislation would not prohibit arbitration.
  • Sponsors: Rep. Hank Johnson (D-Ga.)
• The Fairness in Nursing Home Arbitration Act (S. 512 / H.R. 1237)
  • Would eliminate forced arbitration clauses specifically in nursing home contracts.
  • Sponsors: Sens. Mel Martinez (R-Fla.) and Herb Kohl (D-Wis.) / Rep. Linda Sanchez (D-Calif.)