Monday, April 16, 2007

The Future (?) of Employment & Consumer Arbitration

Arbitration At the NAA's Beyond the Protocol conference Friday and Saturday, folks from the AFL-CIO and SEIU said flat-out that one of their legislative priorities in 2009 will be nuking employment and consumer arbitration.  How likely is that?

Here are some of the factors that I think will go into the equation:  (1) a Democratic sweep in the 2008 national elections is probably a prerequisite.  (2) Consumer arbitration is becoming uniquitous and egregiously lopsided.  I tried to buy a $20 gift certificate at the mall yesterday and was presented with an arbitration agreement requiring arbitration at my expense in front of a 3-arbitrator panel in Guam and, of course, I couldn't bring my case as a class action.  This begs for a backlash.  (3) Look for one well-publicized case of a broad swath of consumers or employees getting screwed by a lopsided arbitration clause.  That'll create political momentum.  (4)  Today's Wall Street Journal reports that the Securities and Exchange Commission is exploring a new policy that would require shareholder derivatives to be brought in arbitration.  Not surprisingly, investor-rights groups are digging in their heels.  The pendulum's shifting.  And if the fight continues to make headlines, regular folks are likely to start wondering: if arbitration shouldn't be foisted on well-heeled investors, why should it be foisted on me?

It'll be interesting to see what this will mean for employment arbitration.  Judicial insistence that employees retain the ability to enforce their statutory rights has given employees somewhat more protection than consumers, and my sense is that most (though certainly not all) employment arbitration provisions are better for employees than the litigation alternative.  Will the FAA be amended to nuke both consumer and employment arbitration?  Will a "bill of due process rights" be added to the FAA to protect consumers and employers?  Will employers succeed in differentiating employment and consumer arbitration?  Stay tuned . . . .


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I hope the unions aren't placing any big bets on passing that bill (or the Employee Free Choice Act, for that matter).

The critical question is whether opponents will mount a filibuster. They certainly would in the case of the EFCA but conceivably could do so on the arbitration matter too.

The best historical comparison is the 1978 labor law reform bill. Recall that unions were far stronger then and that Democrats had much larger majorities in both houses and also held the presidency. The House was an easy victory; the majority party always controls it. When proponents ran into problems in the Senate, they repeatedly watered down the bill until there was very little of substance left. Even so, they weren't able to get the 60 votes needed to stop the filibuster.

What has changed since then? Unions are much weaker, the Democrats are unlikely to have equally large Congressional majorities, and 1978's conservative Southern Democrats who were reluctant to support the bill have largely been replaced by conservative Republicans who will fight it tooth and nail.

Posted by: Dennis Nolan | Apr 16, 2007 5:47:48 PM

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