Career Advice

Should You Care About Employee Forced Arbitration Agreements?

Woman getting to know coworkers while adjusting to a new job

Earlier this month, more than 200 workers at Los Angeles-based Riot Games walked off the job to protest the company’s forced arbitration of two sex discrimination and Equal Pay Act lawsuits, and of all claims of sexual harassment.

They were protesting what they saw as a culture of sexism as well as the company’s practice of forcing employees to sign mandatory arbitration agreements when they are hired — long before they might get into any dispute with the company.

Perhaps the protesters were inspired by similar demonstrations by Google employees in February that led to Google announcing that it would end forced arbitration for all disputes, a decision that expanded upon its earlier announcement that it would end forced arbitration only in cases of sexual harassment and assault.  

Following Google’s announcement, a number of Google workers joined lawmakers in Washington D.C. for the unveiling of the FAIR Act.

What is the FAIR Act, and why should you care about it?

The Forced Arbitration Injustice Repeal Act is about “guaranteeing every individual their day in court,” says U.S. Sen. Richard Blumenthal (D-CT), one of the bill’s authors, who calls forced arbitration by employers “fundamentally unfair and un-American.”

GENIE HARRISON Headshot (2)
Genie Harrison

Simply put, you have the right under the U.S. Constitution to trial by jury if you’ve been injured by another party. Mandatory arbitration requires you to waive your right to sue in court. These clauses are used all the time in consumer and employment contracts – usually buried in the small print that nobody reads. Instead of having a judge and jury hear your story in a courtroom, your complaint is funneled through a private system that is less likely to give you the justice to which you’re entitled.

The FAIR Act would make unenforceable all pre-dispute arbitration agreements, between an employee, job applicant or independent contractor and the employer, relating to the job or prospective job. The FAIR Act would invalidate pre-dispute arbitration agreements that apply to, among other disputes, claims of harassment, discrimination, or retaliation, a hiring controversy, discipline, termination, or disagreements about work duties or pay.

Is there anything good about arbitration? Companies argue that arbitration is less costly and more streamlined than jury trials, but the facts don’t bear this out. The average arbitration takes between one and two years, which is about the length of a court case. And it’s pretty pricey, with fees averaging about $25,000. The company pays those fees, but don’t be fooled: As I’ll explain below, it’s a bargain for your employer.

Companies also argue that the arbitration system is completely fair and balanced because both sides must agree on the arbitrator and both sides get to present all of their evidence. I’ll explain why it’s anything but a level playing field.

What’s bad about arbitration?

Employers prefer arbitration because they are more likely to win and if they lose, they are likely to pay less than they would if they lost at trial.

It favors the powerful. Think about it: Employers pay the private arbitrators’ bills and usually pick the arbitration company they’re going to use. Why would an arbitrator bite the hand that feeds it? Data on arbitration awards shows that the system consistently favors the powerful, with defendants (employers) winning far more frequently than plaintiffs (employees). My team compiled five years’ worth of data on California employment arbitration cases and found this eye-opening statistic: In arbitration cases before provider American Arbitration Association (“AAA”) involving Macy’s employees, 93% of the cases were dismissed. By contrast, AAA arbitrations involving defendants other than Macy’s resulted in dismissals at the rate of 7.5%, on average. So, depending on how many cases the employer brings to the arbitration company – and how much money the arbitration company is making from the employer — employees’ claims are likely to be dismissed instead of heard. How is that fair to employees?

It doesn’t provide legal protections. Even though arbitration is supposed to be a legal process, arbitrators aren’t required to follow the law. Yes, you read that correctly. They can make decisions based on any rationale they want, which means that the process is completely arbitrary. To make matters worse, you can’t appeal a bad decision. Once the arbitrator makes the decision, you’re stuck with it.

It’s a secret. Imagine you’ve been sexually assaulted at work. Wouldn’t it be good for the public to know about this? It might make your employer clean up its act, preventing the same thing from happening to someone else. But guess what: In arbitration, the trial is behind closed doors and the case documents are not available to the public, so there’s no way the case can shame bad actors into changing their ways.

“Forced Arbitration is a harasser’s best friend because it forces the cases of women who are facing harassment or any other kind of gender discrimination into a secret chamber where no one ever knows what happened to them,” Gretchen Carlson said this month before a Congressional panel considering the change. It remains to be seen whether, or when, the FAIR Act will be approved and become effective.

The plain truth is that arbitration is designed to dissuade employees from bringing their claims. If this doesn’t work for you, let your Congressperson know.

Genie Harrison, a Los Angeles lawyer who represents plaintiffs in workplace sexual harassment and assault litigation, is an upcoming president of the Consumer Attorneys Association of Los Angeles and the creator of Incident Genie and Damages Genie, sexual harassment and assault documentation and reporting apps.

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