The week leading up to the midterm elections was filled with political drama.
Amid all of this, House Democrats introduced a major bill that would protect access to the court system to millions of US workers. On October 30, Rep. Jerrold Nadler (D-NY) and a group of House Democrats introduced the Restoring Justice for Workers Act, which would ban businesses from requiring workers to sign arbitration clauses. News of the bill ended up buried in the avalanche of midterm coverage, but the proposal is worth highlighting because it would impact millions of US workers.
Forcing employees to sign arbitration agreements is common practice now, and usually happens during the hiring process. Workers essentially waive their right to sue the company for potentially violating the law, whether it’s related to sexual harassment, racial discrimination, stealing their wages, or anything else.
Instead, employees must take their claims to private arbitration, a quasi-legal forum with no judge, no jury, and nearly zero government oversight. Under this secretive process, workers are less likely to win their cases. And when they do win, they tend to get much less money than they would in court.
The Democrats’ new bill is pretty straightforward: Employers would not be able to force workers to sign these agreements, and could not retaliate against anyone who chooses not to. It would also be illegal to require workers to waive their right to join a class-action lawsuit or file claims in arbitration as a group.
Nadler, whose district includes parts of Manhattan and Brooklyn, said widespread use of mandatory arbitration has “tied the hands” of American workers.
“Forced arbitration strips working Americans of their day in court to hold employers accountable for wage theft, discrimination, harassment and many other forms of misconduct,” Nadler said in a statement on October 30. A week later, he won his bid for reelection.
The bill, which Nadler introduced with Rep. Bobby Scott (D-VA), has 57 co-sponsors. All of them are Democrats. On Wednesday, Sen. Patty Murray (D-WA) introduced a similar version of the bill in the Senate. To make it through both chambers of Congress, the bill would need bipartisan support, but Republican leaders have shown no interest in previous bills aimed at limiting mandatory arbitration.
However, controversy over the business practice shows no sign of dying down, and has recently prompted several major US companies —including Google and Facebook— to drop forced arbitration for sexual harassment claims. Workers want more than that.
Millions of US workers are now barred from the court system
About half of all non-unionized workers at US companies are subject to these agreements, according to the Economic Policy Institute, which is more than double the share of workers in the early 2000s. America’s most well-known companies, including Walmart, Starbucks, Macy’s, Uber, Google, and McDonald’s, now require all or some of their workers to sign them. (Full disclosure: Vox Media does too.)
The rise of mandatory arbitration has made it nearly impossible for workers to seek legal justice for wage theft, overtime violations, and job discrimination. And in the wake of a recent Supreme Court ruling that allows employers to prohibit class-action claims from workers in arbitration, companies have even more incentive to add arbitration clauses to their employment contracts.
Mandatory arbitration was once limited to contract disputes between businesses, but now it also extends to legal disputes with consumers and employees.
The widespread use of arbitration clauses in the workplace came after a crucial 2001 Supreme Court ruling involving sexual harassment.
In that case, Circuit City Stores Inc. v. Adams, a salesperson working at a California Circuit City store sued the company for sexual harassment. The employee, Saint Clair Adams, said his co-workers harassed him because he was gay. But Adams, like all other Circuit City employees, had signed an agreement to resolve all disputes with the company through private arbitration. Circuit City argued in federal court that Adams had to move his claim to arbitration.
The judge sided with Adams, arguing that the Federal Arbitration Act — which allows businesses to resolve contract disputes through arbitration — has a provision excluding employment contracts. The ruling was upheld by the Ninth Circuit Court of Appeals.
But Circuit City took the case to the Supreme Court, where the justices overturned the lower court’s ruling, allowing businesses to extend arbitration to nearly all employment contracts.
The justices, in their 5-4 opinion, created a very narrow interpretation of the employment exclusion in the Federal Arbitration Act. It came down to this line of the act: “but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in interstate or foreign commerce.”
The justices decided that this clause limited the exemption “to transportation workers.” In other words, only workers in the transportation industry were exempt from these mandatory agreements; all other workers could be forced to take their claims to arbitration.
In May 2018, the Supreme Court handed businesses another win in a 5-4 decision in Epic Systems Corp. v. Lewis. The court said it’s also legal for US employers to prohibit workers from joining together to sue the company over discrimination, wage theft, and other workplace violations. Now workers who sign arbitration clauses with class-action waivers can only file claims individually through private arbitration. That means that a US worker’s effort to seek legal justice, or to force a company to change working conditions, is even more difficult.
Mandatory arbitration is particularly bad for women and workers of color
When women began to come forward to describe rampant sexual harassment at companies like Fox News and the Weinstein Company, many realized that they could not seek legal justice in the courts because they had signed mandatory arbitration agreements.
Former Fox News anchor Gretchen Carlson was one of them. She ended up suing former Fox News CEO Roger Ailes for sexual harassment, and they settled for an undisclosed amount. But Carlson could not sue Fox News for the company’s role in allowing the sexual harassment to persist, and neither could dozens of other women who accused the media company of tolerating sexual harassment, had they decided they wanted to sue.
As more women speak up about sexual harassment in the workplace, many of them are pressuring members of Congress to restrict or abolish arbitration clauses from US workplaces.
In October 2017, Rep. Beto O’Rourke (D-TX) introduced the Mandatory Arbitration Transparency Act, which prohibits businesses from including a confidentiality clause in their arbitration agreements related to discrimination claims.
In December, a bipartisan group of senators and representatives introduced the Ending Forced Arbitration of Sexual Harassment Act, which exempts sexual harassment cases from required arbitration.
On February 12, all 56 state attorneys general (including those in five US territories) weighed in, urging congressional leaders to vote on the bills. In their letter, they said that forcing sexual harassment cases to go to arbitration perpetuates the “culture of silence that protects perpetrators at the cost of their victims.” They also questioned the process itself:
While there may be benefits to arbitration provisions in other contexts, they do not extend to sexual harassment claims. Victims of such serious misconduct should not be constrained to pursue relief from decision makers who are not trained as judges, are not qualified to act as courts of law, and are not positioned to ensure that such victims are accorded both procedural and substantive due process.
Then in March, Sen. Richard Blumenthal (D-CT) and a group of Senate Democrats proposed a bolder idea: Don’t let businesses force employees and consumers to take their claims to arbitration.
Their bill, the Arbitration Fairness Act, would let workers and consumers decide where to pursue their legal claims. But so far, Republican leaders in Congress have ignored these proposals.
The latest bill from House Democrats, the Restoring Justice for Workers Act, goes even further for workers, by also prohibiting employers from banning class-action claims (it does not, however, include a ban on arbitration clauses for consumer claims).
Companies are starting to limit arbitration
Facing pressure from employees and the public in the wake of the MeToo movement, several Silicon Valley tech giants have stopped requiring workers to take sexual harassment cases to arbitration. Microsoft and Uber were the first. Last week, Google and Facebook announced plans to do the same.
But some employees say the exclusion for sexual harassment claims is not enough.
Take Google, for example. The tech company experienced a swift employee backlash last month in response to a New York Times article detailing how Google paid millions of dollars in exit packages to male executives accused of sexual harassment, while staying silent about the misconduct.
Anger over the payouts added to mounting frustration within the company over Google’s ethics and lack of transparency on other matters. Then, on November 1, more than 20,000 Google employees and contractors across the world walked off the job to protest the company’s mishandling of the sexual harassment claims.
As part of their demands, employees urged Google executives to end forced arbitration for all employees who file discrimination claims, which includes sexual harassment, racial discrimination and gender discrimination. A week later, Google agreed to some of their demands, but said they would only drop forced arbitration for sexual harassment and assault claims.
Organizers of the walkout applauded the company’s move, but said they were upset that Google ignored their demands to address allegations of widespread racial discrimination and gender discrimination.
“The company must address issues of systemic racism and discrimination, including pay equity and rates of promotion, and not just sexual harassment alone,” they wrote.
Giving employees access to the court system is an important start.
Correction: a previous version of this article incorrectly referred to Sen. Patty Murray as a member of the House of Representatives.