SEC. 2. FINDINGS. 
The Congress finds the following: 
(1) The Federal Arbitration Act (now enacted 
as chapter 1 of title 9 of the United States Code) 
was intended to apply to disputes between commer-
cial entities of generally similar sophistication and 
bargaining power. 
(2) A series of United States Supreme Court 
decisions have changed the meaning of the Act so 
that it now extends to disputes between parties of 
greatly disparate economic power, such as consumer 
disputes and employment disputes. As a result, a 
large and rapidly growing number of corporations 
are requiring millions of consumers and employees 
to give up their right to have disputes resolved by 
a judge or jury, and instead submit their claims to 
binding arbitration. 
(3) Most consumers and employees have little 
or no meaningful option whether to submit their 
claims to arbitration. Few people realize, or under-
stand the importance of the deliberately fine print 
that strips them of rights; and because entire indus-
tries are adopting these clauses, people increasingly 
have no choice but to accept them. They must often 
give up their rights as a condition of having a job, 
getting necessary medical care, buying a car, open-
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ing a bank account, getting a credit card, and the 
like. Often times, they are not even aware that they 
have given up their rights. 
(4) Private arbitration companies are some-
times under great pressure to devise systems that 
favor the corporate repeat players who decide wheth-
er those companies will receive their lucrative busi-
ness. 
(5) Mandatory arbitration undermines the de-
velopment of public law for civil rights and consumer 
rights, because there is no meaningful judicial review 
of arbitrators’ decisions. With the knowledge that 
their rulings will not be seriously examined by a 
court applying current law, arbitrators enjoy near 
complete freedom to ignore the law and even their 
own rules. 
(6) Mandatory arbitration is a poor system for 
protecting civil rights and consumer rights because 
it is not transparent. While the American civil jus-
tice system features publicly accountable decision 
makers who generally issue written decisions that 
are widely available to the public, arbitration offers 
none of these features. 
(7) Many corporations add to their arbitration 
clauses unfair provisions that deliberately tilt the 
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systems against individuals, including provisions 
that strip individuals of substantive statutory rights, 
ban class actions, and force people to arbitrate their 
claims hundreds of miles from their homes. While 
some courts have been protective of individuals, too 
many courts have upheld even egregiously unfair 
mandatory arbitration clauses in deference to a sup-
posed Federal policy favoring arbitration over the 
constitutional rights of individuals. 
SEC. 3. DEFINITIONS. 
Section 1 of title 9, United States Code, is amend-
ed— 
(1) by amending the heading to read as follows: 
‘‘§ 1. Definitions’’; 
(2) by inserting before ‘‘ ‘Maritime’ ’’ the fol-
lowing: 
‘‘As used in this chapter—’’; 
(3) by striking ‘‘ ‘Maritime transactions’ ’’ and 
inserting the following: 
‘‘(1) ‘maritime transactions’;’’; 
(4) by striking ‘‘commerce’’ and inserting the 
following: 
‘‘(2) ‘commerce’ ’’; 
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(5) by striking ‘‘, but nothing’’ and all that fol-
lows through the period at the end, and inserting a 
semicolon; and 
(6) by adding at the end the following: 
‘‘(3) ‘employment dispute’, as herein defined, 
means a dispute between an employer and employee 
arising out of the relationship of employer and em-
ployee as defined by the Fair Labor Standards Act; 
‘‘(4) ‘consumer dispute’, as herein defined, 
means a dispute between a person other than an or-
ganization who seeks or acquires real or personal 
property, services, money, or credit for personal, 
family, or household purposes and the seller or pro-
vider of such property, services, money, or credit; 
‘‘(5) ‘franchise dispute’, as herein defined, 
means a dispute between a franchisor and franchisee 
arising out of or relating to contract or agreement 
by which— 
‘‘(A) a franchisee is granted the right to 
engage in the business of offering, selling, or 
distributing goods or services under a mar-
keting plan or system prescribed in substantial 
part by a franchisor; 
‘‘(B) the operation of the franchisee’s busi-
ness pursuant to such plan or system is sub-
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stantially associated with the franchisor’s trade-
mark, service mark, trade name, logotype, ad-
vertising, or other commercial symbol desig-
nating the franchisor or its affiliate; and 
‘‘(C) the franchisee is required to pay, di-
rectly or indirectly, a franchise fee; and 
‘‘(6) ‘pre-dispute arbitration agreement’, as 
herein defined, means any agreement to arbitrate 
disputes that had not yet arisen at the time of the 
making of the agreement.’’. 
SEC. 4. VALIDITY AND ENFORCEABILITY. 
Section 2 of title 9, United States Code, is amend-
ed— 
(1) by amending the heading to read as follows: 
‘‘§ 2. Validity and enforceability’’, 
(2) by inserting ‘‘(a)’’ before ‘‘A written’’; 
(3) by striking ‘‘, save’’ and all that follows 
through ‘‘contract’’, and inserting ‘‘to the same ex-
tent as contracts generally, except as otherwise pro-
vided in the title’’; and 
(4) by adding at the end the following: 
‘‘(b) No predispute arbitration agreement shall be 
valid or enforceable if it requires arbitration of— 
‘‘(1) an employment, consumer, or franchise 
dispute; or 
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‘‘(2) a dispute arising under any statute in-
tended to protect civil rights. 
‘‘(c) An issue as to whether this chapter applies to 
an arbitration agreement shall be determined by Federal 
law. Except as otherwise provided in this chapter, the va-
lidity or enforceability of an agreement to arbitrate shall 
be determined by the court, rather than the arbitrator, 
irrespective of whether the party resisting arbitration chal-
lenges the arbitration agreement specifically or in conjunc-
tion with other terms of the contract containing such 
agreement. 
‘‘(d) Nothing in this chapter shall apply to any arbi-
tration provision in a collective bargaining agreement.’’. 
SEC. 5. EFFECTIVE DATE. 
This Act, and the amendments made by this Act, 
shall take effect on the date of the enactment of this Act 
and shall apply with respect to any dispute or claim that 
arises on or after such date. 
Æ 
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