If you are an entrepreneurial small business owner or health professional operating a solo or small independent healthcare practice, you probably know about arbitration clauses.
Or maybe you don’t. But your lawyer–you know that wonderful person who looks out for you, making sure your small business or practice runs like a top–he or she certainly knows about arbitration clauses.
In fact, if you have insomnia and want a sleep aid tonight, you could pull out one of those contracts your lawyer has prepared for your business or practice and read through it until you find a provision talking about arbitration. You might fall asleep before you get all the way through it, but if you can manage to read all the way to the end of the arbitration clause, you’ll probably see that it says something like this: “Any dispute, controversy or claim arising out of or relating in any way to this Agreement shall be exclusively resolved by binding arbitration.”
In other words, if your business or practice and the other party to the contract have a disagreement about whatever the contract covers (for example, an employment or other services-provision relationship), you’re not going to the courthouse–you’re going to settle the problem in somebody’s private office. And, there’s not going to be a judge in a black robe (or a jury) deciding on who’s right and who’s wrong. Instead, your decision-maker is going to be a lawyer (retired or still practicing) or a former judge. It’s all going to be much more informal. And, also probably a faster process than going to court. And cheaper.
What’s not to love?
Well, apparently, the U.S. House of Representatives thinks that there’s a lot about arbitration that’s not very lovable. And to show that lack of love, the House voted yesterday to approve a new piece of legislation known as the “Forced Arbitration Injustice Repeal Act.”
How’s that for some zingers about how bad arbitration is? “Forced” and “injustice” both in the name in this new legislative bill. And guess what? It spells out what a great bill it is through the well-known gambit of having the first letters of the words in the name of the legislation spell out an acronym describing just how wonderful the bill is–in this case the “Forced Arbitration Injustice Repeal Act” is the FAIR Act. How much better could it get?
Now, for now, at least, the FAIR Act is not law–it has only passed the House of Representatives, not the Senate. And, it seem unlikely that the FAIR Act will pass the Senate, so maybe it’s too early to get worked up about the FAIR Act.
But, if it were to become law, what would the FAIR Act mean for business owners?
Well, first of all, businesses would not be able to require that all disputes with its employees and independent contractors be resolved through arbitration. Rather, workers would be able to sue the business out of matters arising from their work relationship with the business.
And, businesses, whether traditional or online businesses, would not be able to require that all disputes with its customers arising out of purchases be settled through arbitration. Did you buy a T-shirt from an online retailer and you’re not satisfied with the product you paid for? Rather than having to arbitrate the dispute due to the boilerplate terms and services on the retailer’s website, you can see them in court. That is, you could if the FAIR Act were to become law.
But until then, mandatory arbitration is going to remain the order of the day in most employment and consumer cases due to arbitration clauses in contracts signed by employees and terms and services posted by online retailers.