Congress Takes Steps to End Forced Arbitration in Securities Disputes

By: Matthew D. Kohel | 4.2.19 | Media

In February, Rep. Hank Johnson and Sen. Richard Blumenthal introduced the Forced Arbitration Injustice Repeal (FAIR) Act. FAIR is one of several bills recently introduced in Congress to amend the Federal Arbitration Act. FAIR and the other bills come hot on the heels of Google’s decision to remove arbitration clauses from its employee and direct contractor agreements after a November 2018 walkout by more than 20,000 of its employees who protested the company’s handling of sexual harassment claims.

According to a congressional press release, FAIR and the other bills “would end the use of forced arbitration in consumer, worker, civil rights, and antitrust disputes.” This proposed legislation would prevent all companies, including broker-dealers, investment advisors, and insurance companies, from requiring that their customers and employees agree to arbitration before a dispute arises. FAIR would have significant ramifications for broker-dealers and other companies in the securities industry, because they invariably require that their customers and employees enter into agreements with arbitration clauses. Under FAIR, the parties would nevertheless be free to arbitrate their claims after a dispute has arisen.    

While alternate dispute resolution (ADR), such as arbitration, has become a more common way for parties to resolve their claims, Congress has unsuccessfully tried to pass similar bills in the past, such as the Arbitration Fairness Act. In that regard, it is worth noting that FAIR would be retroactive.

Matthew Kohel is a Partner in Goodell DeVries’ Commercial Litigation Group. Mr. Kohel and other Goodell DeVries attorneys handle nationwide litigation and arbitration involving, among others, broker-dealers and registered representatives. If you are interested in having Mr. Kohel speak on the topic of the FAIR act or other arbitration issues, please contact us today.