It has become quite evident that the arbitration system has expanded in scope over the past decade. While many argue this expansion is for good reasons, I strongly disagree. Huge corporations often claim that circumventing the court system reduces litigation costs, allows more limited discovery and yields a swifter result for both parties. I don’t believe they can prove those statements to be true. Mandatory, forced arbitration favors large corporations and is very much anti-consumer. The deck is stacked against individuals when they face huge corporations in arbitration and that’s exactly why I strongly oppose arbitration unless both sides agree to it.
Consumers will find arbitration agreements in practically every single contract they sign these days. We have come to expect them with the purchase of nearly every consumer product. There are still some surprises, however, when arbitration clauses pop up unexpectedly.
One such instance involved Gretchen Carlson. When she filed a lawsuit in July alleging sexual harassment during her tenure at Fox News, Ms. Carlson became part of a disturbing statistic. At least 25 percent of American women say they have experienced sexual harassment in the workplace, according to a 2016 report from the Equal Employment Opportunity Commission (EEOC). Ms. Carlson also faced a surprising obstacle that blocks an untold lot of them – there was an arbitration clause in her employment contract.
From a consumer advocate standpoint, one major issue is that there is no reliable data on how many Americans have given up a constitutional right to a court hearing through arbitration clauses. With traditional consumer transactions, the assumption today is almost always that an arbitration clause is in play. Employment law, however, is a different beast – arbitration in employment cases is only recently gaining attention.
One academic study estimates, using projections based on narrow data sets, that as many as a quarter of nonunionized American workers may be subject to the restrictions. Arbitration clauses are found not only in multimillion-dollar contracts like that of Ms. Carlson’s but also in the most mundane hiring materials – form contracts, even employee handbooks – that have been given to employees at Anheuser-Busch or Applebee’s or some editors at TIME.
Ms. Carlson cleverly navigated her own clause: she sued Roger Ailes, the co-founder, CEO and chairman of Fox, not the company itself. Her suit alleged that Ailes “unlawfully retaliated” against her and “sabotaged her career because she refused his sexual advances and complained about severe and pervasive sexual harassment.” As soon as the case was public, Ailes’ lawyers tried to move it into arbitration, arguing that Ms. Carlson had broken the terms of her contract. Her contract, according to Ailes, said that any legal disputes had to be brought in an arbitration proceeding. Ailes denied wrongdoing, and he and Ms. Carlson agreed on a confidential settlement.
This August, in response to Ms. Carlson’s case, three U.S. Senators, Richard Blumenthal, Al Franken and Dick Durbin, wrote to four major arbitration businesses, requesting information on employment disputes and cases involving sexual harassment that have been heard in secret by arbitrators. Questions included how many sexual-harassment lawsuits have been referred to binding arbitration through their organizations, and how many cases involved confidentiality clauses similar to Carlson’s, regardless of the cause of action.
Three of the four arbitration organizations responded. The American Arbitration Association, one of the largest businesses (and a not-for-profit), noted that its data was not comprehensive and added that only 4 percent of employment-plan cases in 2014 involved sexual-harassment issues. For Sen. Blumenthal, that information was not adequate. He stated:
The responses give us no informative or comprehensive view of how prevalent the problem is. It could be very substantial with illegal or dangerous activity going unreported or underreported.
Last year, Sen. Franken reintroduced the Arbitration Fairness Act, which would invalidate current arbitration clauses in employment, consumer, civil rights and antitrust claims. Under this measure, a claimant alleging sexual harassment who is subject to an arbitration mandate could not be forced to resolve the dispute that way. This year, Sen. Patrick Leahy followed it up with the Restoring Statutory Rights Act, which says no arbitration agreement can make you waive a statutory right. Sen. Blumenthal, who refers to Ms. Carlson’s case as a teaching moment for the nation, observed:
Clearly these clauses can be misused, and silence can be a means for abusers to conceal misconduct. If Ms. Carlson had adhered strictly to the terms of her employment contract, her case would have remained a secret forever.
Arbitration Clauses are very easy to miss in a document – you probably have agreed to one at some point, whether at your job or at your bank. They can be just a few short words, but their impact is vast. These clauses push disputes between parties to a system in which an arbitrator (sometimes a retired judge) is hired to adjudicate the matter. Some contracts prohibit claimants from speaking about the claims, which in harassment cases could leave other victims in the dark.
Research by Katherine Stone, a law professor at UCLA, and Cornell law professor Alexander Colvin shows that payouts in arbitration are much smaller than the damages Plaintiffs might receive in court – so small that most lawyers are reluctant to take the cases. Ms. Carlson’s reported $20 million settlement is far more than most persons could ever hope to win. Because of the confidentiality in most cases, statistics are hard to come by. But a 2007 Chicago-wide survey put median sexual-harassment settlements at about $30,000. Also, a national study from a researcher at Columbia University in 2006 found employees who take their cases to trial win on average $217,000.
Despite the difference in relief, it may be getting harder for employees to take sexual-harassment complaints to court. “Anecdotally speaking, the use of arbitration agreements from our perspective is increasing,” says Peggy Mastroianni, legal counsel at the EEOC. That is not good news for employees.
Arbitration in employment contracts is gaining traction and most people don’t think a second thought about signing an agreement – even assuming they notice it is there. Professor Stone stated:
When you take a job, you don’t think you are going to end up suing your employer. Any employer that is big enough will be advised to put an arbitration clause into their employment materials, and employees will not be able to bring a class-action suit. It’d basically be malpractice not to advise that.
On the other hand, “[t]he EEOC’s stance has always been that mandatory arbitration of employment discrimination is bad: the secrecy, the lack of precedent,” says Ms. Mastroianni. She added: “We litigated this issue in a number of cases that we lost.”
Despite the increasing uses of arbitration agreements, the trend in forcing cases into confidential arbitration suits is deeply troubling and rightfully so. The Obama Administration has tried to curb the arbitration boom without involving Congress. Recently, a Department of Health and Human Services agency barred nursing homes that receive federal funding from mandating that residents resolve disputes in arbitration. In May, the Consumer Financial Protection Bureau (CFPB) proposed a rule to prevent banks and credit-card companies from using arbitration clauses with consumers. In June, the Department of Education proposed to protect students from arbitration clauses buried in enrollment agreements.
While these rulings are all steps in the right direction, none of them are the cure for arbitration that consumers and employees badly need. On the other hand, slow progress is better than no progress. However, the battle must continue.
Source: Time Magazine
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