Prohibits mandatory arbitration agreements in consumer and employment contracts; repeals existing provisions prohibiting mandatory arbitration clauses in certain consumer contracts.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5240
SPONSOR: Dinowitz TITLE OF BILL:
An act to amend the general business law, in relation to prohibited
mandatory arbitration agreements; and to repeal section 399-c of such
law relating to prohibiting mandatory arbitration clauses in certain
consumer contracts
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to comprehensively update the General Busi-
ness Law's section regarding mandatory arbitration clauses and the way
in which they are regulated in New York State.
SUMMARY OF SPECIFIC PROVISIONS:
Section one of the bill repeals the current section 399-c of the General
Business Law and replaces it with a new section 399-c. The terms
"consumer dispute", "employment dispute", and "mandatory arbitration
agreement" are defined in this section. The section bans mandatory arbi-
tration clauses in New York State and declares them unenforceable much
like the original section 399-c did. The section bans mandatory arbi-
tration clauses from being included in insurance contracts. The section
would ban workers exempted from the Federal Arbitration Act from being
forced to sign mandatory arbitration clauses resulting from an employ-
ment contract. The section would also ban any mandatory arbitration
agreement that is not enforceable under federal law.
Section two contains the effective date.
JUSTIFICATION:
As mandatory arbitration clauses in contracts for consumer goods,
services, and employment have become more and more commonplace, consum-
ers are increasingly forced to resolve disputes via arbitration. In many
cases, consumers are unaware that the contract they are signing requires
them to resolve disputes through arbitration, and not through the court
system. They are in effect unknowingly signing away the right to their
"day in court."
Questions continue to be raised about the fairness of the arbitration
process, due to studies finding that arbiters tend to disproportionately
rule in favor of businesses over the consumers. Private arbitration
companies have a financial incentive to rule in favor of the business
that is paying for their services. Given these questions, it is appro-
priate to amend the state law to make sure that every New Yorker knows
their rights when it comes to agreeing to arbitration clauses in
contracts.
PRIOR LEGISLATIVE HISTORY:
2015-16 - A.9956A - Third Reading Cal. No. 192
FISCAL IMPLICATIONS:
None to the State
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law.
