House’s passage of FAIR Act signals end of mandatory arbitration of workplace disputes

For decades, American employers have relied on judicial precedent and the Federal Arbitration Act (FAA) to enforce predispute mandatory arbitration agreements, which are signed before any known conflict arises between the employer and the employee (typically at the beginning of the employment relationship) requiring them to arbitrate any future employment disputes. They often contain provisions by which employees waive their right to file a class or collective action against the employer. They have been essential weapons in an employer’s arsenal for limiting costs and risks associated with class/collective actions.

There has been a growing movement to limit, or outright eliminate, an employer’s ability to enforce predispute arbitration agreements and class/collective action waivers. On March 17, 2022, the U.S. House of Representatives took another step toward the goal. In a 222-to-209 vote, the House passed the “Forced Arbitration Injustice Repeal Act of 2022,” commonly referred to as the “FAIR Act.”

FAIR Act

The FAIR Act’s stated purpose is two-fold: (1) ban predispute agreements that force the arbitration of future employment disputes, and (2) prohibit agreements that interfere with an employee’s right to participate in class or collective actions related to their employment. The Act further states that any agreements contradictory to these goals would be invalid and unenforceable.