The national movement to bring awareness to sexual harassment has stirred a conversation about how workplace harassment claims are resolved. Many victims’ rights advocates have spoken out against arbitration procedures mandated through employment contracts, saying the process is designed to silence victims and keep them out of court.
Similarly, a September 2017 study by the Economic Policy Institute decried the trend toward arbitration clauses — which are now mandated by 53.9 percent of nonunion private-sector employers, compared to just over 2 percent of employees in 1992 — as “a growing threat to workers’ rights.” The study also cited “growing evidence” of arbitration producing different outcomes than litigation, allegedly to the disadvantage of employees.
But practicing arbitrators and labor and employment law attorneys have a very different view of the process, which they said can often be more beneficial to an employee than a court proceeding would be. Negative perceptions of arbitration are generally a product of misinformation, rather than actual defects in the proceedings, they said.
“There’s a perception that if an employer is requiring an arbitration, they’re doing it for some purpose, or they have something to hide,” said David Given, a labor and employment law attorney at Faegre Baker Daniels LLP. “That’s usually not the case.”
Though the #MeToo sexual harassment awareness movement has shone a negative spotlight on mandatory arbitration, employers aren’t rethinking the inclusion of arbitration clauses in their employment contracts, at least not in Indiana.
Part of the tendency to stick to the status quo can be attributed to Indiana’s conservative nature and a public policy that favors arbitration proceedings, said Dave Swider of Bose McKinney & Evans LLP. But in Given’s experience, most of his clients don’t require their employees to sign arbitration agreements. Ice Miller attorney David Carr has had a similar experience, noting that employers can be turned off from arbitration proceedings because of their limited appealability and rules of evidence, as well as costs.
The lack of change to arbitration procedures could also be attributed to the fact that few sexual harassment claims are sent to arbitration, said Michael Clark, vice president of marketing for the American Arbitration Association. Recent data show that only 3.5 percent of all AAA cases between 2014 and 2016 were related to sexual harassment claims.
“Just because you have an arbitration clause in an employment contract does not mean you cannot go seek alternate methods for dispute resolution,” Clark said.
Those alternate methods are numerous and varied, the attorneys and arbitrators said. Carr’s clients, for example, tend to prefer mediations as cheaper, nonbinding alternatives that still maintain an element of confidentiality.
Swider, however, often advises his clients to seek waivers of jury trials, rather than requiring arbitration. Arbitrators can be inclined to “split the baby” when it comes to resolving workplace conflicts, Swider said, often to the benefit of the employee. But a bench ruling is likely to be more reasoned and objective, he said.
Looking specifically to sexual harassment claims, even employees who are subject to mandatory arbitration still have the option of filing a claim with the Equal Employment Opportunity Commission, Clark said. Given similarly noted that signing an arbitration agreement does not prevent a victim from pursuing nonjudicial administrative remedies.
Further, Harrison & Moberly attorney Jay Hancock noted that in some cases, arbitration is against state statute. He pointed to the example of a mechanic’s lien, which must be adjudicated in a court in the county where the property in question is located, pursuant to Indiana Code Section 32-28-3-6. Thus, as an AAA arbitrator who arbitrates construction law claims, Hancock said he would be forced to reject a request for arbitration over a mechanic’s lien, even if all parties requested it.
The AAA’s report of arbitrating a very small percentage of sexual harassment claims mirrors what Indiana arbitrators see in their work. Jerry Pitt of The Mediation Center, Inc., in Indianapolis, said in his 20 years of working as an arbitrator, he’s never been asked to handle a workplace sexual harassment case.
Historically, victims of workplace sexual harassment may have avoided filing complaints against their harassers to avoid shame or embarrassment, thus keeping the number of sexual harassment-related arbitrations low, Pitt said. But Carr noted the #MeToo movement has spurred change in the way society views harassment victims, which has prompted employers to review their human resources policies.
“It’s been more in the nature of making sure there’s a prompt and effective investigation and significant remedial action and discipline,” Carr said. “… They’re hoping it never gets to arbitration.”
Discrimination and wage disputes will more frequently invoke arbitration proceedings, Swider said, while Clark noted wrongful termination claims can also be subject to arbitration clauses. Carr also pointed to a growing trend of claims against “equal opportunity abusers” — people who harass all co-workers, not just those falling into specific protected groups.
Regardless of the subject of an arbitration proceeding, national conversations about workplace harassment have cast arbitration clauses in a generally negative light. But the attorneys and arbitrators say that perception is based on misunderstandings of how arbitration works.
For example, one of the biggest criticisms of arbitration — that it forces victims to keep quiet about their harassment — is false. Though an arbitrator is subject to confidentiality about the proceedings, the parties are not, Clark said. Confidentiality is only required of victims if they sign nondisclosure agreements, or if the terms of their arbitration clauses specifically require confidentiality, he said.
The ability to have a say in the terms of the clause is a commonly overlooked benefit to mandated arbitration, Pitt said. Aside from both parties having a say in who the arbitrator will be, there’s also the ability to set the terms of discovery, schedules and available remedies.
Any fault in arbitration proceedings can often be attributed to parties not taking advantage of the process’s customizable nature, Pitt said. To that end, he encouraged employers to consult with professionals who can draft specialized arbitration clauses, rather than adopting boilerplate language.
Another common provision of arbitration clauses — mandated class action waivers — is currently under review by the U.S. Supreme Court via the consolidated cases of National Labor Relations Board v. Murphy Oil USA/Epic Systems Corp. v. Lewis/Ernst & Young LLP v. Morris. The decision in that case could change the nature of arbitration clauses and limit the leverage employers have when resolving workplace disputes.
Specifically, the Court is tasked with determining whether arbitration mandates that also require employees to waive their right to join class action lawsuits that address employment law violations are violations of the National Labor Relations Act. A ruling in favor of class action waivers would protect employers from high-profile, expense class actions that Hancock said are generally bad for business.
However, a ruling in favor of class action waivers could also mean employees may be less inclined to file lawsuits because they would be required to bring their claims individually, Given said. And if those employees are subject to arbitration clauses, then their claims might not go to court at all.
New Justice Neil Gorsuch is predicted to be the swing vote in the decision in the consolidated cases, which is expected soon.•