“While arbitration offers privacy and confidentiality, it is for exactly these reasons that the #MeToo movement developed. Moreover, other than perhaps the differences in the speed of the two processes, the advantages of arbitration can be flipped on their head and become disadvantages.”

Abstract: The Equal Employment Opportunity Center alone receives on average approximately 7,000 sexual harassment claims a year, a figure that does not include claims filed with state and local agencies. The cost of resolving these claims logged by the EEOC averages $63 million a year based on the past four years. On average, there are nearly 464,000 victims (age 12 or older) of rape and sexual assault in the United States each year. The Centers for Disease Control and Prevention reports that nearly 1 in 5 women in America experiences a rape or attempted rape, and nearly 44 percent of women and about 25 percent of all men experience some form of sexual violence in their lifetime. A White House statement called sexual assault a “public health crisis.” But victims of sexual harassment and assault in the workplace have not had open access to the courts due to mandatory arbitration clauses in their employment agreements. In this article, an experienced labor law attorney discusses a new law that puts an end to forced arbitration, what it means to existing claims, and its impact on victims, employees, and employers. 

Introduction

The Act adds a new section to the Federal Arbitration Act (FAA). The FAA was passed in 1925 to ensure that courts enforce arbitration agreements contained in “a contract evidencing a transaction involving commerce.” See 9 U.S.C. § 2. Although the FAA was intended to address maritime and commercial disputes, in a series of decisions beginning in the 1980s, the United States Supreme Court “dramatically expanded the applicability of the FAA to arbitration clauses in everyday contracts.” See House Judiciary Committee Report.

According to that Report, the Supreme Court “has upheld the enforcement of arbitration clauses even when doing so prevents an individual from vindicating a state or federal statutory right. Furthermore, by imposing arbitration on a ‘take it or leave it’ basis, large companies have largely eviscerated the congressional intent of arbitration as a voluntary process agreed to between parties of equal bargaining power.” Id. Ultimately, in 1991, the Supreme Court ruled that an employee whose employment contract contained an arbitration provision was required to arbitrate her claims, thus bringing arbitration mandates into the workplace. See Gilmer v. Interstate/ Johnson Lane, 500 U.S. 20 (1991). Twenty years later, the Supreme Court expanded its jurisprudence on forced arbitration in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), and American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013), holding that class action waivers in mandatory arbitration agreements were broadly enforceable. The combination of this case law ensured that employers could now protect themselves from court litigation for both individual and class action claims.

Arbitration requirements are now widespread in consumer contracts and, often, consumers are unaware that they are entering into forced arbitration agreements. Most arbitration clauses are found in application forms, employment contracts, employee handbooks, privacy policies, and even monthly billing statements. The House Judiciary Report noted that these clauses are hidden in order to prevent consumers from pursuing their claims in court and gave an example highlighting the inequity of forced arbitration. In that case, Massage Envy, the largest massage chain in the country, compelled victims of sexual assault to arbitrate their claims and refused to allow women to cancel their monthly membership unless they agreed to forced arbitration …. keep reading!