Tony Thurmond introduced a new bill in the Assembly that would restrict businesses from requiring customers to sign arbitration contracts. If the Assembly Bill 2667 is passed into law, requirements for mandatory arbitration contracts will become illegal. A consumer or worker can only start a court process against a seller or employer after involving an arbitrator after signing an arbitration agreement.
Businesses often include arbitration agreements when selling some products like vehicles and electrical goods. Many consumers are quick to sign sale agreements without reading all the fine details in the sale contract. If a product does not function as expected, sellers use their terms and conditions in arbitration courts to argue their cases.
A similar bill was introduced last year but its main focus was on workers and not consumers. The previous bill, Assembly Bill 465, sought to ban mandatory arbitration agreements between employers and employees. The bill was rejected based on the argument that it violated Federal laws. Business lobbyists hope that the same argument will apply to this new bill while consumer rights groups hope otherwise.
Arguments for a ban on mandatory arbitration contracts
- Consumers’ legal rights
One argument for introducing this bill is that contracts deny consumers some of their legal rights. Consumer and labor right groups have supported the bill arguing that arbitration does not guarantee consumers and workers fairness and due process. Consumers and workers feel that they have better chances of winning cases if they go straight to court.
- Some negotiations are not documented
One reason for preferring the court process is that some oral agreements and negotiations with sellers are not included in sale agreements. The same case applies to employees who have oral negotiations with employers but the agreements are not included in employment contracts. The jury considers arguments from all sides and is sometimes moved by the emotions of consumers.
Arguments against banning arbitration agreements
- Arbitrators rule cases based on facts and not emotions
Business owners prefer arbitration processes because cases are determined based on facts. Consumers must give sufficient evidence to support their claims and a letter of law. Arbitrators often demand for documented evidence and may not consider arguments with no support. Sometimes consumers do not base their arguments on facts but on their welfare. They can persuade a jury to make a ruling in their favor even when facts favor sellers.
- Arbitration is fast and inexpensive
Business groups also support the arbitration process because it is faster and cheaper than the court process. They have higher chances of winning cases and protecting their brand names.
- The bill violates federal laws
Another argument against the bill is that it would violate some provisions in the federal laws on arbitration. The federal law allows businesses and employers to issue arbitration contracts. Passing the bill into law would require an amendment to the federal law, which is unlikely.
- The courts are congested
Arbitration is preferred because it decongests the courts. Simple cases are solved fast without a lengthy court process. Banning arbitration would overcrowd the courts as many consumers and workers seek justice for cases they would have otherwise ignored. The courts are already overcrowded even with arbitration laws in place. A blanket ban on arbitration contract undermines the role of arbitrators in resolving disputes as well.
Banning mandatory arbitration is not a viable solution given the current state of courts. Instead, consumer and workers rights groups should consider lobbying for a bill that specifies the situations in which arbitration agreements should apply. All parties require legal protection and banning arbitration contracts does not guarantee employers and sellers legal protection.