Forced arbitration clauses are commonly found in contracts between individuals and businesses. In cases where individuals bring legal claims against their employer or a business, forced arbitration clauses generally prohibit them taking such claims to court and instead substitute closed-door arbitration proceedings, where they are less likely to receive an impartial hearing.^[7]

Some employers have removed provisions from contracts subjecting their employees to forced arbitration amid public pressure regarding concerns that the practice inhibits the rights of workers to hold their employer accountable for allegations of sexual harassment, discrimination, and wage theft.^[8] In November 2018, over 20,000 employees of the technology giant Google organized a walkout protest against the company in response to Google's policies around "equity and transparency in the workplace", which includes forced arbitration in worker contracts.^[9] In February 2019, Google announced they were ending their policy of forced arbitration for full-time employees.^[10]

The FAIR Act defines arbitration clauses as "pre-dispute arbitration agreements" and aims to broadly end arbitration agreements for both consumers and employees. The act is planned as an amendment to the Title 9 of the United States Code, under which the new regulations would become Chapter 4.

Section 402, titled "No validity or enforceability", bans predispute arbitration agreements, as well as any predispute class action waivers in disputes regarding employment, trusts, civil rights, and/or in the sale of property and/or the usage of a service. The bill does not apply to contracts between employers and labor organizations, or between labor organizations, except if the provisions of the contract deprives workers of the right to seek judicial enforcement.

The act additionally amends Title 9 in the phrasings in section 1, 2, 208, and 307 to avoid conflict between sections and the new Chapter 4.^[6]