Potential Arbitration Changes in Texas

Arbitration of employment disputes might be in trouble. On March 6, 2009, Representative Dan Gattis (R – Milam, Williamson) introduced House Bill 2696 in the Texas House of Representatives during the 81st Legislative Session. The Bill was co-authored by Representative David McQuade Leibowitz (D – Bexar). The Bill seeks to amend portions of the Civil Practice and Remedies Code related to arbitration proceedings and arbitration agreements.

Specifically, the Bill would amend the Civil Practice and Remedies Code in Texas in the following ways:

1. Arbitration agreements must include a statement, initialed by each party to the agreement, stating the party has chosen to arbitrate a controversy that exists at the time of the agreement (if Subsection (a)(1) of the Civil Practice and Remedies Code applies) or stating each party has chosen to arbitrate any controversy that arises between the parties after the date of the agreement (if Subsection (a)(2) of the Civil Practice and Remedies Code applies);

2. Agreements to arbitrate must be prominently displayed in the document and in 12-point bold type; and

3. A party to a contract may not require any other party to the contract to agree to arbitration as a condition of the contract.

What does this mean? Right now, not a whole lot. The Bill was left pending in committee on April 15, 2009 and no further action has been taken by the Texas House of Representatives. Furthermore, the Texas Legislature adjourns on June 1, 2009 and does not reconvene until 2011 unless the Governor calls a special session. It appears unlikely, therefore, the Texas Legislature will take any additional action on this bill in the next eleven (11) days.

This Bill could signal a change on the horizon, though. If the Bill is re-introduced during the next session and further action is taken, the consequences could be significant. Currently, many employers require their employees to agree to arbitrate any potential employment disputes as a condition of employment. This Bill would prevent such agreements. Arbitration in the employment context could become a thing of the past.

For the time being, nothing is changing but we’ll keep an eye on the next regular legislative session and any special sessions and keep you updated. In the meantime, it is always a good idea to review your arbitration agreements and decide if arbitration is really the best idea for you and your company.