South Asian Insider
Why can companies still silence us with mandatory arbitration?
By Moira Donegan
When it was revealed in October that Andy Rubin received a $90m exit package after being forced to resign over a credible sexual harassment claim, Google employees around the world walked out in protest. They were disgusted at what appeared to be a reward for bad behavior, and they wanted more accountability for members of management. But they were also angry at the strategy that the company used to keep harassment claims a secret: forced arbitration.Google employees, like their counterparts at a ballooning number of American companies, were subject to forced arbitration – meaning that if they had a conflict with their employer, such as wage theft, race discrimination, or in this case, sexual harassment, they were not entitled to take that claim to court. Instead, they would be forced into an alternative justice system called arbitration.
Arbitration is a system of private courts. They operate using different rules than civil courts – there is no judge or jury, for instance, but an “arbitrator” who is chosen by the parties, and paid by the employer, to decide the case. It is strictly confidential. Since the 1920s, arbitration has been legally binding: once parties agree to settle a dispute in arbitration, they give up their right to go to court.
The practice has been around for centuries, functioning as a quicker, cheaper alternative to the formal justice system, and it was originally developed to settle disputes between businesses. But starting in the mid-1980s, the US supreme court issued a series of rulings saying that arbitration could be used for other kinds of conflicts – including conflicts between employees and employers over things such as discrimination.
According to the Economic Policy Institute, more than 55% of the American workforce is now subject to mandatory arbitration – up from just 2% in 1992. Most of those workers don’t know that they have forfeited their right to sue. Employers slip mandatory arbitration clauses into their employee contracts – those big stacks of confusingly worded hiring documents that employees are asked to sign, but usually don’t read.
In the wake of the #MeToo movement, mandatory arbitration clauses have posed a problem. Women who feel newly emboldened and safe in coming forward with their accounts of harassment and assault in the workplace find to their surprise that they have already relinquished their right to a day in court. Instead, they are forced into a private system, where their claims are resolved with unclear rules for the process, little oversight, and a mandate to keep it all a secret.
There is a reason employers have been so eager to adopt mandatory arbitration clauses. The arbitration system favors employers over employees in several crucial ways. Chief among them is confidentiality: the secrecy of arbitration proceedings allows companies to avoid embarrassment and public censure. Mandatory arbitration clauses are often paired with non-disclosure or non-disparagement agreements, which forbid an employee from saying anything that could be construed as negative about the company or its leaders. Combined, these provisions allow employers that use arbitration to conceal bad behavior by management or a pervasive culture of harassment, and to quietly dispatch those who complain.
The confidentiality provision also hampers a complainant’s lawyer, who, because she is bound by confidentiality, also can’t look for other plaintiffs who have had similar experiences of harassment or discrimination at the company. “There are [lawyers] out there who know about fairly harrowing wrongdoing,” says David Noll, a professor at Rutgers Law and an expert in arbitration. “And they can’t go out and find other people that it happened to.”
This brings us to a second pillar of arbitration’s disenfranchisement of workers: in arbitration, all disputes are one-on-one. There is no such thing as a class action arbitration case. Even if sexual harassment is pervasive at a company, with many victims who have standing to complain, women will have to bring complaints to arbitration one at a time.
This changes the economic calculus of bringing a harassment complaint: it is much less efficient, and much more expensive, to hire a lawyer for every individual employee who has been victimized. And just as mandatory arbitration clauses are often paired with non-disclosure agreements, they are also often accompanied by class action waivers, meaning the employee can’t join any class action case that is brought against the company in a court. An individual arbitration is her only option.
There’s also the matter of outcomes. In arbitration, employees win their cases much less often than in court – and when they do, they are awarded much less money. There’s no right of appeal. And all of this is agreed to in a contract that’s presented to employees without the opportunity for negotiation at the time of hiring, before they know what sort of company culture they’re entering or what their colleagues and superiors might subject them to. The supreme court has repeatedly reaffirmed arbitration’s legitimacy and the legality of these exploitative practices by employers who coerce or trick employees into signing away their legal rights. But there is a growing consensus that mandatory arbitration isn’t a fair way to resolve employment discrimination claims. “The situation now, where every arbitration agreement is enforceable – it’s not a sustainable equilibrium,” says Noll.
Feminists agree, and have made a renewed push to end forced arbitration in sexual harassment cases. Google ditched the practice after their employees walked out; Facebook followed suit the next day. But real change will require not just such tactical concessions to workers by large companies, but legislation to enforce a ban on this unjust practice. New York’s governor, Andrew Cuomo, signed a ban on forced arbitration for sexual harassment contracts in July, a major legislative victory for the #MeToo movement, and similar laws are on the books in Washington and Maryland. Other states are preparing to follow suit.
There has even been a move toward a national fix. The Restoring Statutory Rights Act, which would bar forced arbitration in a wide array of employee disputes, was introduced in Congress in 2016. But it’s languished in committee, ignored by lawmakers unwilling to prioritize workers’ rights.
Constitutional rights, like the freedom to sue over violations of federal anti-discrimination law, shouldn’t be dependent on what state you live in, or what company you work for. They shouldn’t be able to be taken away in relationships as unequal as that between an employer and an employee. And illegal behavior by companies, like the enabling of sexual harassment, should not be able to be swept under the rug and hushed up in an asymmetrical, secretive process. Abuse thrives on secrecy, and sunlight is the best disinfectant. It is long past time to make forced arbitration nationally illegal in sexual harassment claims, if not in all workers’ complaints, and to bring these disputes into the public eye, under the full scrutiny and protection of the court. Workers’ rights – including, crucially, the right of women to be free from sexual harassment – need not be privatized and kept in the shadows. They must become a public concern.
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