Prohibits the enforcement of mandatory arbitration agreements clauses and joint-action waivers with respect to workplace disputes; clarifies that section 7515 of the civil practice laws and rules applies retroactively to nullify pre-existing illegal mandatory arbitration clauses.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8462
SPONSOR: Dinowitz TITLE OF BILL:
An act to amend the civil practice law and rules, in relation to prohib-
iting the enforcement of mandatory arbitration agreements clauses and
joint-action waivers with respect to workplace disputes
PURPOSE:
To regulate and prohibit the enforcement of mandatory arbitration claus-
es in certain contracts and clarify the impact of existing law related
to them.
SUMMARY OF PROVISIONS:
Section one of the bill names the bill the Workers' Rights Enforceabili-
ty Act.
Section two of the bill declares legislative findings that detail the
facts surrounding mandatory arbitration clauses in New
York.Specifically, mandatory arbitration clauses and joint-action waiv-
ers are contrary to New York public policy and illegal in the state when
not preempted by federal law. The courts have misconstrued previous
amendments to the law regarding mandatory arbitration clauses and such
Amendments were intended to retroactively nullify mandatory arbitration
clauses in the cases where the state law applies to.
Section three of the bill amends § 7515 of the civil practice law and
rules to redefine and expand the scope of prohibition in the law related
to mandatory arbitration clauses. It splits the legal classification of
the clauses into mandatory pre-dispute arbitration clauses, mandatory
post-dispute arbitration clauses and joint-action waiver clauses, adding
language that bans their use in any contract of employment as well. The
section also sets forth various necessary conditions for the enforcement
of a mandatory post-dispute arbitration clause.
Section four provides the severability clause. Section five of the bill
provides the effective date.
JUSTIFICATION:
Despite New York's reputation as a leader in establishing and protecting
workers' rights, New York has lagged behind much of the country in
protecting workers' ability to vindicate their rights in court. The
proliferation of mandatory arbitration clauses and class action waivers
for workers has led to most workers, especially low-wage workers, being
subject to forced arbitration at work. When New York first enacted its
Arbitration Act in the early twentieth century, arbitration was widely
understood as a more expedient dispute resolution process for ,busi-
nesses on equal footing. The use of mandatory arbitration clauses for
statutory claims in the non-union employment context is a relatively
recent phenomenon, ushered in, in part, by the U.S. Supreme Court's
decisions in Gilmer and Circuit City. Unfortunately, in the employment
context, mandatory arbitration has become a significant barrier to work-
ers being able to vindicate workplace rights guaranteed by law. Without
the right to trial by a judge or jury, the right to appeal or the right
to participate in group actions, most workers are not able to pursue
claims for stolen wages or other workplace violations as arbitration
almost always provides a significant advantage to businesses. Because
of this, corporations use mandatory arbitration clauses to effectively
insulate themselves from wrongdoing. A report by the National Employment
Law Project estimated that in 2019, New Yorkers lost $390 million in
stolen wages that would not be recovered due to mandatory arbitration
clauses and class action waivers.
Sadly, federal laws and courts have seriously inhibited possible state
action that could challenge the prevalence and impact of mandatory arbi-
tration clauses, primarily through the passage of the Federal Arbi-
tration Act ("FAA"), which allows for the use of mandatory arbitration
clauses and preempts most state law on the issue. However, Section 1 of
the FAA provides that it does not apply to any "contracts of employment
of seamen, railroad employees, or any other class of workers engaged in
foreign or interstate commerce." The U.S. Supreme Court later clarified
in Circuit City that this exemption only applies to the contracts of
employment of transportation workers.Then, in New Prime, the Supreme
Court held that "contracts of employment" is an expansive term that
includes any agreement to perform work, including a so-called "independ-
ent contractor" agreement. This provides New York an opportunity to
regulate mandatory arbitration clauses in certain fields, which we have
taken advantage of before. However, after New Prime, some courts have
suggested that New York law still permits the enforcement of mandatory
arbitration clauses for transportation workers who are not subject to
the FAA, a conclusion that this bill clarifies as incorrect.
Additionally, the bill amends the law to also prohibit and nullify any
mandatory arbitration clause or joint action waiver in a "contract of
employment," except where such prohibition is preempted by federal law.
It makes clear that its provisions - as well as those of previous
versions•of CPLR 7515 - apply retroactively, too, as some courts have
mistakenly held that it does not; if these judicial errors are not
corrected, a worker who started a job in 2018, and is a victim or sexual
harassment or discrimination in 2023 would still be forced to arbitrate
because of the original employment contract.
PRIOR LEGISLATIVE HISTORY:
This is a new bill
FISCAL IMPLICATIONS:
None to the state
EFFECTIVE DATE:
Immediately
