The Arbitration Fairness Act of 2009

The Arbitration Fairness Act of 2009 would amend the Federal Arbitration Act so that mandatory arbitration clauses in employment, consumer and franchise agreements are unenforceable.

On April 1, 2009, the Supreme Court of the United States ruled in the case of 14 Penn Plaza LLC v. Pyett that mandatory arbitration clauses with respect to ADEA claims are enforceable. In direct response to that decision and the increasing willingness of many courts to enforce mandatory arbitration agreements, Congress has begun an attempt to overturn 14 Penn Plaza and other precedent favoring arbitration.

Substantively, the Arbitration Fairness Act of 2009 seeks to make pre-dispute mandatory arbitration provisions contained in employment, consumer and franchise agreements unenforceable. However, mandatory arbitration clauses in employment agreements entered into before enactment of the Arbitration Fairness Act would still be enforceable. Finally, pre-dispute arbitration clauses in collective bargaining agreements unrelated to an employee’s ability to seek judicial enforcement for discrimination claims would still be enforceable.

This legislation would drastically alter the current employment landscape, as employers would no longer be allowed to include arbitration clauses in employment agreements. Instead, arbitration would be available only with the agreement with the employee after the claim has been brought .