Arbitration Fairness Act of 2009 and Senior Living

25 February 2009 Publication
Authors: Michael A. Okaty

Legal News Alert: Senior Living

Last year, Foley monitored the development of the Fairness in Nursing Home Arbitration Act of 2008, which did not become law. On February 12, 2009, similar but more expansive legislation was introduced in the United States House of Representatives and referred to the Committee on the Judiciary that would invalidate pre-dispute arbitration agreements for employment, consumer, and franchise disputes. The Arbitration Fairness Act of 2009 (Bill) makes invalid and unenforceable any pre-dispute arbitration agreement for several new categories of disputes. Rep. Hank Johnson (D-Ga.), one of the Bill’s co-sponsors, contends, “This is not an anti-business bill, but a pro-consumer bill.”

The Bill would limit the scope of the Federal Arbitration Act of 1925 (FAA) and exclude from its coverage three types of disputes:

  1. Employment disputes between an employer and employee arising out of their employment relationship
  2. Consumer disputes between a person (other than an organization) who seeks or acquires real or personal property, services, money, or credit for personal, family, or household purposes, and the seller or provider of such property, services, money, or credit
  3. Franchise disputes between a franchisor and franchisee

The Bill is broader than the Fairness in Nursing Home Arbitration Act, which was introduced last year and would have banned the use of mandatory, pre-dispute arbitration clauses in nursing home contracts. A dispute arising from a nursing home contract would likely fall under the definition of consumer dispute in the Bill, thus invalidating any pre-dispute arbitration provision found in such contracts. That is certainly the intent of Mr. Johnson, who cited placing a loved one in a nursing home as an event that should be covered by the Bill.

If enacted in its present form, the Bill would make void pre-dispute arbitration agreements or agreements to arbitrate disputes that have not yet arisen at the time of making the agreement. Accordingly, businesses, including operators of senior living facilities, should follow this Bill’s progress closely and consult with their counsel regarding any changes needed to pre-dispute arbitration agreements.

Foley will continue to monitor the progress of the Bill and provide further updates when appropriate. Access prior Foley alerts about the Bill here:

September 16, 2008
Fairness in Nursing Home Arbitration Act Moves Closer to Passage

August 4, 2008
House Panel Approves Fairness in Nursing Home Arbitration Act: Law Would Prohibit Nursing Home Pre-Dispute Arbitration Agreements

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our senior living clients and our colleagues.

Please contact your Foley Senior Living attorney if you have any questions about this topic or want additional information regarding senior living industry matters. Authors and editors:

Christopher S. Linde
Orlando, Florida

Michael A. Okaty
Orlando, Florida

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