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: A2301
SPONSOR: Dinowitz (MS)
 
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 appropriate to amend the state law to make sure that
every New Yorker knows their rights when it comes to agreeing to arbi-
tration clauses in contracts.
 
PRIOR LEGISLATIVE HISTORY:
2017-18 - A.5240 - Third Reading Calendar/S.7924 - Referred to Consumer
Protection
2015-16 - A.9956A - Third Reading Calendar
 
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.
STATE OF NEW YORK
________________________________________________________________________
2301
2019-2020 Regular Sessions
IN ASSEMBLY
January 22, 2019
___________
Introduced by M. of A. DINOWITZ, WEINSTEIN, SEAWRIGHT, GALEF, WILLIAMS,
M. G. MILLER, GOTTFRIED, ABINANTI, D'URSO, JAFFEE, ZEBROWSKI --
Multi-Sponsored by -- M. of A. SIMON -- read once and referred to the
Committee on Consumer Affairs and Protection
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
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 399-c of the general business law is REPEALED and a
2 new section 399-c is added to read as follows:
3 § 399-c. Prohibited mandatory arbitration agreements. 1. Definitions.
4 (a) The term "consumer dispute" shall mean a dispute between an individ-
5 ual who seeks or acquires real or personal property, services (including
6 services relating to securities and other investments), money, or credit
7 for personal, family or household purposes and the seller or provider of
8 such property, services, money or credit.
9 (b) The term "employment dispute" shall mean a dispute between an
10 employer and employee arising out of the relationship of employer and
11 employee as defined in section 3 of the Fair Labor Standards Act of 1938
12 (29 U.S.C. 203).
13 (c) The term "mandatory arbitration agreement" shall mean any agree-
14 ment to arbitrate a dispute that had not yet arisen at the time of the
15 making of the agreement.
16 2. Prohibited mandatory consumer and employment arbitration agree-
17 ments. Notwithstanding any other provision of this article, no mandato-
18 ry arbitration agreement shall be valid or enforceable if it requires
19 arbitration of an employment dispute or consumer dispute.
20 3. Prohibition of effect of certain mandatory arbitration clauses or
21 agreements. Mandatory arbitration clauses or agreements covering
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01197-01-9
A. 2301 2
1 consumers and employee disputes are contrary to the established public
2 policy of this state. Because employees and consumers are required to
3 assent to these agreements as a condition of being an employee or
4 consumer before any dispute has arisen with the employer or merchant,
5 these agreements do not offer employees and consumers a meaningful
6 choice about how to resolve their disputes with the employer or
7 merchant. In addition, mandatory arbitration agreements prevent employ-
8 ees and consumers from effectively vindicating their rights under state
9 law. For these reasons, except when inconsistent with federal law, the
10 state prohibits the formation and enforcement of mandatory arbitration
11 agreements in employment and consumer contracts.
12 4. Prohibition of mandatory arbitration clauses in insurance agree-
13 ments. A mandatory arbitration agreement within or part of any written
14 contract for insurance with a consumer or other written agreement
15 involving the offering of insurance to a consumer is invalid, unenforce-
16 able and void. Any such arbitration agreement shall be considered sever-
17 able, and all other provisions of the contract for insurance shall
18 remain in effect and given full force.
19 5. Prohibition of mandatory arbitration clauses in employment
20 contracts for workers exempted from the Federal Arbitration Act. (a) A
21 mandatory arbitration agreement within or part of any written contract
22 of employment of seamen, railroad employees or any other class of work-
23 ers engaged in foreign or interstate commerce is unenforceable and void.
24 Any such arbitration agreement shall be considered severable, and all
25 other provisions of the employment contract shall remain in effect and
26 given full force.
27 (b) The provisions of this section shall not apply to agreements nego-
28 tiated with any labor union through collective bargaining.
29 6. Prohibition of mandatory arbitration clauses that are not governed
30 by federal law. Any mandatory arbitration agreement, or portion there-
31 of, in an employment or consumer contract is invalid, unenforceable and
32 void, when the enforceability of such arbitration agreement, or the
33 portion at issue, is governed by state law. Any such arbitration agree-
34 ment shall be considered severable, and all other provisions of the
35 employment contract shall remain in effect and given full force.
36 § 2. This act shall take effect on the one hundred eightieth day after
37 it shall have become a law.