Lazaro noted that some states are moving to restore investors’ legal rights. Nevada’s “best-interest” regulation, for instance, would give investors a private right of action to sue if they believe their advisor or broker violates their fiduciary rights.
The regulation would for the first time shift the burden of proof to brokers or advisors. “Unlike now, where the presumption for brokers [in arbitration] is that they have no fiduciary duty, you’ll be starting with the presumption that the fiduciary duty applies. The broker-dealer firm will have to establish that one of the exceptions in the rule applies,” added Lazaro.
It is unclear if the Republican Senate would pass such legislation. The securities, banking, credit card and insurance industries have historically vehemently opposed similar legislation for fear of massive class-action suits.
“Bills challenging arbitration clauses haven’t gotten to a vote in the prior Congresses, so we’re certainly hopeful that it will gain some traction,” Lazaro said.
But headwinds may be changing. A new nationwide poll by Hart Research found broad bipartisan support from 84 percent of voters for legislation to end forced arbitration, with 87 percent of Republicans and 83 percent of Democrats supporting such legislation.
Paul Bland, executive director of Public Justice, a consumer advocacy group, said that nationally “the energy in favor of the FAIR Act is like nothing I’ve seen before in this fight for corporate accountability. ... Its passage would make American life much safer, healthier, and fairer.”
Blumenthal introduced his bill while standing with Chipotle employees who were forced to work overtime without pay and were not able to file class action lawsuit because they were forced to sign a forced arbitration clause when hired.
Other speakers included Google employees and former Fox News host Gretchen Carlson, who made news as a leader of the #MeToo movement when she shared her story of being sexually harassed at the TV network. Carlson recounted being limited in seeking legal justice because of a forced arbitration clause in her employment contract. Fox eventually settled with the anchor for $20 million.
Carlson named Google, Lyft, Microsoft, Uber and Vox Media as other tech companies that have taken leadership in ending forced arbitration and called upon other companies to do the same.
Last week, Google announced it has ended forced arbitration for the workers it directly employs, but not for the 50 percent of its workforce who are independent contractors.