If you have ever read your credit card agreement, you’ve seen a mandatory arbitration provision. These clauses are often slipped into consumer agreements to waive a party’s right to jury trial to resolve disputes. They have gained popularity in recent years amongst business entities, like your credit card companies, as a way to minimize costs. While this may sound like an innocent and even mutually beneficial arrangement, there is no guarantee that it will operate that way.
If you’ve been paying attention to the news over the past two years, you have no doubt seen examples highlighting how these provisions can work to the extreme detriment of the individual. One rather striking example of that is told by the experience of Ms. Jamie Lee Jones in her claims against her former employer, Haliburtan. An overview of the Jones case can be found here.
The experience of Ms. Jones led Senator Al Franken to author an amendment to the Department of Defense Appropriations Act for the 2010 fiscal year (H.R. 3326) which dramatically restricts the use of mandatory arbitration clauses in employment contracts between defense contractors and their employees or independent contractors. President Obama signed this into law on December 21, 2009.
And while Senator Franken’s legislation will not directly impact most of us, other similar legislation, specifically the “Arbitration Fairness Act of 2009″, is presently pending before Congress and is intended to limit the use of Mandatory Arbitration provisions in other contracts, including consumer agreements. According to one summary of the legislation, this bill:
“declares that no pre-dispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment, consumer, or franchise, or civil rights dispute. … [and d]eclares, further, that the validity or enforceability of an agreement to arbitrate shall be determined by a court, under federal law, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.”
The legislation is reportedly still active and before the Judiciary Committee at present. Click here to check the status of the litigation.