Don't Let Predatory Companies 'Hide Behind' Forced Arbitration, Military Groups Urge Congress

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soldiers from the Idaho National Guard leave for a deployment
More than 250 soldiers from the Idaho National Guard’s largest unit, the 116th Cavalry Brigade Combat Team, leave for a deployment on Nov. 5, 2021 to Southwest Asia in support of Operation Spartan Shield. (Becky Vanshur/U.S. National Guard)

A coalition of military and veterans advocacy groups is urging Congress to protect service members from forced arbitration agreements, legal clauses that prevent troops from taking companies that violate their rights to court.

In a letter Wednesday to leaders of the Senate Armed Services and Veterans Affairs committees, 15 groups urged the lawmakers to support an amendment to the annual defense policy bill that would bar employers, financial institutions and other companies from including forced arbitration clauses in contracts with service members.

Such agreements, which are often buried in the fine print of employment, credit card, cellphone and other contracts, force people to handle a dispute through arbitration, a process that often favors the business.

"Forced arbitration is a one-sided, non-transparent process in which service members have very little chance at achieving a favorable outcome," the groups wrote in their letter, obtained exclusively by Military.com.

The problem has become particularly acute for reservists and National Guardsmen in recent years as they get called up for active duty more and more, and employers who are upset their employees are stepping away turn to forced arbitration, said Patrick Murray, legislative director at the Veterans of Foreign Wars and one of the signatories on the letter.

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"This isn't something they talk about in the recruiting offices," Murray said in an interview with Military.com. "They might talk about things like the Servicemembers Civil Relief Act or the Uniformed Services Employment and Reemployment [Rights Act]. They might tell you that those things have protections for you."

But Murray said that the arbitration clauses are often snuck into contract language by companies.

"Some of this stuff is in the fine print," he said. "Your employer may have that in their contract, and you might not know that until you're faced with it."

The Servicemembers Civil Relief Act, or SCRA, which was passed in 1940 and last updated in 2003, is supposed to provide legal and financial protections for troops and their families, while the Uniformed Services Employment and Reemployment Rights Act, or USERRA, is a 1994 law meant to protect troops from employment discrimination based on their service.

But in 2012, the Government Accountability Office found at least 15,000 instances of financial institutions failing to properly reduce mortgage interest rates for service members who qualified and 300 illegal foreclosures annually in violation of the SCRA.

"The perpetrators of these illegal violations are not being held accountable as they simply hide behind forced arbitration clauses," the organizations wrote in the letter. "Service members need their legal protections restored without delay, not another study to show what they already know -- that forced arbitration hurts them and their families, and renders rights granted by SCRA and USERRA virtually meaningless."

Stand-alone bills to bar forced arbitration agreements for service members have been introduced in the House and the Senate.

Sens. Richard Blumenthal, D-Conn., and Lisa Murkowski, R-Alaska, have also introduced an amendment to the upper chamber's version of the National Defense Authorization Act, or NDAA, mirroring the stand-alone bill.

There have been similar legislative efforts for at least the last four years, Murray said.

The Senate is beginning consideration of its NDAA this week, but even amendments with bipartisan support rarely get votes because of broader disputes among senators over which amendments to vote on.

Even if the amendment makes it into the Senate version of the bill, it still must survive negotiations with the House before becoming law.

Murray expressed some concern that companies will lobby against the amendment, but was hopeful more attention would get the problem solved.

"No one wants to get very loud about stripping protections from service members," he said.

In addition to the VFW, representatives from the Association of Military Surgeons of the United States, Chief Warrant and Warrant Officers Association of the United States Coast Guard, Enlisted Association of the National Guard of the United States, Fleet Reserve Association, Iraq and Afghanistan Veterans of America, Marine Corps Reserve Association, Military Officers Association of America, Military Order of the Purple Heart, National Guard Association of the United States, Non-Commissioned Officers Association, TREA: The Enlisted Association, U.S. Army Warrant Officers Association, and U.S. Coast Guard Chief Petty Officers Association and Enlisted Association signed the letter.

-- Rebecca Kheel can be reached at rebecca.kheel@military.com. Follow her on Twitter @reporterkheel.

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