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Farmers involved in contract disputes with large agribusinesses must often submit to mandatory arbitration, and are left with no other legal recourse to settle their disputes.
That may soon change if a bill co-sponsored by Wisconsin Senator Russ Feingold and Iowa Senator Chuck Grassley is signed into law.
The Fair Contracts For Growers Act, sponsored by Feingold and Grassley in the U.S. Senate, made a significant move forward this morning as it passed the Senate Judiciary Committee.
According to Feingold, the Fair Contracts for Growers Act would give both parties entering into a livestock or poultry contract more options if conflicts arise. Pursuing arbitration would still be an option, but only if both parties agreed to it.
The legislation is aimed at solving the problem of "non-negotiable agricultural production contracts" that "essentially force farmers or growers to waive their rights to take legal action against the agribusiness, even in the event of fraud, misrepresentation, discrimination, or breach of contract," according to Feingold.
Grassley said that the legislation would change the Packers and Stockyards Act, requiring that if contract arbitration is used to settle a dispute, it must be voluntarily agreed upon by both parties at the time the dispute arises, not when the contract is signed.
According to Grassley, this would allow farmers the opportunity to choose the best form of settlement.
Contract production of agricultural products is a growing practice, and large agribusiness firms have the power to dictate the terms of "take-it-or-leave-it" production contracts to farmers, according to Grassley. When there is a dispute between the packer and the family farmer, and the contract between the two includes an arbitration clause, the family farmer has no alternative but to accept arbitration to resolve the dispute.
"The mandatory arbitration process puts the farmers at a severe disadvantage," said Grassley. "Even in a situation where discrimination or fraud is suspected, a farmer's only recourse under such a contract is to submit to arbitration. The farmer cannot seek redress in court, even if the result is bankruptcy or financial ruin."
Grassley added that arbitration has its benefits in certain cases, so it should remain as an option for farmers, but "it should not be the only option."
According to Feingold's staff, the bill next moves to the full Senate for debate.
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