Royce West (D)
A proposed bill that would invalidate arbitration clauses in many employment contracts has made its way to the Texas Senate Committee on Jurisprudence.
On Feb. 11, the committee received SB 222, which had been pre-filed by its author state Sen. Royce West (D-Dallas) in November.
The proposed bill would authorize courts, not arbitrators, to decide all challenges to the enforceability of employment, consumer and franchise contracts under the Texas Arbitration Act.
"The Texas Arbitration Act … was intended to reflect the Texas heritage of permissive arbitration and was not intended to serve as an expression of public policy compelling arbitration in the absence of an agreement or as a consequence of agreements among parties of disparate bargaining power, nor was it intended to derogate the constitutionally protected right to trial by jury," the introduction to the bill states.
West writes that many business entities add "unfair provisions" to their arbitration clauses "that deliberately tilt the systems against individuals." The provisions strip individuals of their statutory rights, ban class actions and "force people to arbitrate their claims hundreds or thousands of miles from their homes," he added.
Some courts, West writes, have not been protective of individuals and have even upheld egregiously unfair mandatory arbitration clauses in deference to a "supposed" federal or state policy "favoring arbitration over the constitutional rights of individuals."
West claims that private arbitration companies are "sometimes under pressure" to devise a system that favors the business entities.
The bill would apply state law to arbitration questions, and orders compelling arbitration cannot violate a right protected by the constitution of the state of Texas or the United States unless the person knowingly waives the right.
"(T)he validity or enforceability of an arbitration agreement shall be determined by a court, rather than the arbitrator," SB 222 states.
However, West's proposed bill would not apply to an arbitration provision in a collective bargaining agreement between an employer and a labor union. Nor would the bill apply to an arbitration provision required by statute.
If passed, SB 222 would also make interlocutory orders granting a motion to compel arbitration appealable.
If passed by a two-thirds vote of the Senate and the House, SB 222 would take effect immediately after the effective date. In that case, it would apply only to arbitration agreements entered into after that date.
If passed but not by a two-thirds vote, the effective date would be Sept. 1.
Should the arbitrators or the courts decide the enforceability of arbitration contracts? Take our online poll on the Southeast Texas Record home page!