Why Ending Forced Arbitration Isn’t Enough for Victims of Sexual Harassment

In recent weeks, a number of Silicon Valley companies have ended forced arbitration on internal sexual harassment claims, including Google, Square, Airbnb, Facebook and eBay. This follows a recent trend among tech companies, started by Microsoft in December of 2017 and Uber and Lyft in May.

This is undoubtedly great news for employees, especially women, who are often victims of sexual harassment. But before employees of other companies get too excited, a closer look at these company policy changes indicates there’s still a long way to go before workers are treated as fairly as possible. 

Before we get to that point, let’s look at the background of forced arbitration agreements. 

Arbitration Agreements

Arbitration agreements are contracts (or provisions within a larger contract) that require the parties to settle their legal disputes in arbitration rather than a court of law. Traditionally used between businesses, arbitrations are becoming very popular in workplace contracts as a method of resolving discrimination and other types of claims.

The arbitration process will vary widely depending on the arbitrators and the specific arbitration agreement. For the most part, arbitration consists of one or more arbitrators who will hear each side’s arguments, examine evidence, then decide who should win. 

Basically, arbitration is an informal mini-trial. You can think of it as a method of dispute resolution before King Solomon, but without King Solomon having any divine wisdom. Instead, the arbitrators are most likely former attorneys or judges. 

Proponents of arbitration argue it’s faster, cheaper and more efficient than litigating in court, and they’re correct. But efficiency does not equal justice. 

First, the arbitration process is typically confidential. While some employees may appreciate the ability to keep their disagreement with an employer a secret, many do not. Not being able to publicize the alleged wrongs of their employers usually means employees have less negotiating leverage during settlement or receive smaller damage awards when they do win.

Second, there is no jury. This often results in more decisions in favor of the employer. Even when the employee wins, the monetary awards tend to be smaller. 

Third, there is only limited discovery, with less time for the employee to obtain evidence. This hurts employees because it is generally the employer who has the relevant information.  Who has the computer system with all of the emails? The employers. Who has access to most of the witnesses? The employer. Who has access to the metadata, the video tapes, time entries? You get the point. To make matters worse the employee has limited, if any, power to compel a witness to testify and typically has more limits on the number of depositions they can take. 

Fourth, there are limited appeal rights. In many instances, the arbitration decision will be final and no appeal is possible. In the rare situations where an appeal is possible, due to the arbitration rules established by the arbitration agreement, the chances of having a decision reversed are less than that of appealing a regular trial court decision.

Not only is a reversal less likely, but the inability to threaten an appeal reduces any negotiating leverage an employee might otherwise have in a court of law. The prospect of litigating a case at the appellate level, no matter who wins at trial, is strong incentive for employers to give a larger amount of money to the employee when settling cases. In litigation, as in most things in life, the larger the risk, the higher the cost to avoid that risk.

Fifth, there is – some argue – an inherent conflict of interest. Some arbitration agreements explain that the employers will pay the cost of hiring arbitrators. To an employee who may not have much money, this sounds fantastic because arbitrators aren’t cheap. But this creates an incentive for the arbitrator to favor the employer. Moreover, the arbitrator wants repeat business; ruling in favor of the employee or giving large awards to the employee isn’t likely to result in the employer calling the arbitrator back to hear a future case. While I think it unlikely that arbitrators are consciously deciding cases in favor of the employer to curry favor, unconscious bias, in conjunction with the low likelihood of review by an appellate court, makes ruling in favor or employers in close cases easier to do.

Circuit City Stores Inc. v. Adams

Beginning in 1991 and culminating in 2001, a series of Supreme Court cases held that employers could legally force their employees into arbitration. The 2001 case, Circuit City Stores Inc. v. Adams,was the last major opportunity attack on the use of forced arbitration in the workplace. Unfortunately, it did not succeed. 

In this Circuit City case, Adams was an employee who alleged he was being sexually harassed. He tried to sue in court, but Circuit City said Adams signed an employment application which forced him to litigate through private arbitration. 

Based on an interpretation of the Federal Arbitration Act, the Supreme Court agreed with Circuit City and effectively allowed any business to use arbitration agreements in any employment contract. In essence, forced arbitration is the law of the land, unless Congress is willing to change the law or companies voluntarily choose to stop using it. 

Congressional Action

Democratic members in both chambers of Congress have introduced legislation banning the use of forced arbitration in employment contracts. But these bills are unlikely to pass either the House of Representatives or the Senate, let alone get the signature of the current President. So right now, the only hope lies with the employers themselves. Here’s the good news: A handful of tech companies have begun to make some small changes.

Tech Employers

Since the Supreme Court gave the employers legal permission to force arbitration on its employees, the number of employees subject to them has gone up dramatically, from around two percent in 1992 to roughly 25 percent today. But there are some signs that this growth may be slowing, at least in the tech sector.

One industry where employees have an unusual amount of leverage is in technology, most notably in Internet-based tech companies which need programmers desperately to stay in business. As a consequence, many of these tech employees enjoy benefits that employees in many other industries do not often have, such as generous paid parental leave policies.

Another benefit some of these employees are receiving is no longer being subject to forced arbitration agreements in sexual harassment disputes. This doesn’t mean employees can’t use arbitration (it can have its advantages, as discussed above), but the employees ultimately control whether they resolve their sexual harassment claim through arbitration or in open court.

This ability to go public is especially important in sexual harassment cases, where an employer’s desire to keep things private is particularly strong. The idea of going to court and being subject to public opinion is a strong incentive for employers not only to resolve the claims of sexual harassment fairly, but also to put more effort into preventing sexual harassment from occurring in the first place. But there are a few things to keep in mind about these tech companies no longer requiring forced arbitration agreements.

First, this trend of employers no longer requiring forced arbitration in sexual harassment disputes is probably limited to the tech sector or any other industry where there is great demand for high-value employees. These companies tend to be very aware of their public image, so they are more likely to take steps to come across as employee friendly and progressive to the general public and their potential customers.

Without the social and economic pressures of maintaining a certain image or finding enough workers, it’s wishful thinking to assume that other companies will give up a method of dispute resolution that is private, cheap, fast, practically unreviewable and in most cases, decided in favor of the employer.

These recent changes also fall short of protecting workers because they’re limited in scope. For example, they usually only apply to sexual harassment disputes, with conflicts over discrimination still subject to forced arbitration.

Then there’s the fact that non-employees are still forced to arbitrate. That means independent contractors or third-party vendors are still barred from suing in court. This is significant because at some companies, contractors make up substantial portions of the companies’ workers. For instance, at Google, contractors comprise about half of its total workforce.

The recent trend of big tech companies moving away from forced arbitration on sexual harassment is a good first step, but a lot more needs to be done.

Tom Spiggle is author of the book “You’re Pregnant? You’re Fired: Protecting Mothers, Fathers, and Other Caregivers in the Workplace.” He is founder of the Spiggle Law Firm, which has offices in Arlington, Va., Washington, D.C., and Bethesda, Md., where he focuses on workplace law helping protect the rights of clients facing pregnancy and caregiver discrimination, sexual harassment and wrongful termination in the workplace. To learn more, visit: https://www.spigglelaw.com.