Going Public: Avoiding Mandatory Confidential Arbitration of Sexual Harassment Claims

A new bill introduced in the US Senate on December 6, 2017, would prohibit employers from requiring employees to arbitrate (rather than litigate) their sexual harassment claims (see H.R.4570). Likely spurred by the pervasive exposure of predatory behavior by high profile public figures, the bill seeks to invalidate arbitration provisions in employment agreements when invoked in the context of sexual harassment claims.

As discussed at length in our previous WelcomeLaw article, Taking Back Control: Challenging Sexual Harassment in the Workplace, sexual harassment and assault can run the gamut in the workplace. From both an employee's perspective and an employer's perspective, it is an unhealthy and unprofitable proposition. Yet, it continues and it is prevalent. Whether an attack on mandatory arbitration provisions provides any solution or not remains to be seen. However, the subject deserves scrutiny and raises tough decisions for employers and employees alike.

Employers routinely include mandatory arbitration provisions in their employment agreements and handbooks. Collective bargaining agreements almost always include a grievance procedure that precludes court review. Employees generally have no input into the form or substance of the arbitration provision in their employment agreements and may not even realize the importance of the clause or know it is there.

When a dispute arises, the employee usually seeks relief in court and then the employer invokes the arbitration clause. Generally, the validity and enforceability of an arbitration agreement is determined by the Court. This general rule would ordinarily give employees the opportunity to argue in Court that the agreement is unconscionable or otherwise invalid. For example, in Hooters of America, Inc. v. Phillips, 39 F.Supp.2d 582 (1998) aff'd 173 F.3d 933, 935 (4th Cir. 1999), Phillips sought to invalidate the arbitration provision in her employment agreement with Hooters in order to litigate her sexual harassment claim. The Court ruled the arbitration provision was invalid because Hooters had stacked the deck in its favor with a "sham system unworthy even of the name arbitration" including oppressive arbitration rules, arbitrators chosen by Hooters and severe limitations in the damages available in arbitration.

Since the Hooters decision and the 2010 decision of the U.S. Supreme Court in Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), most arbitration agreements now include a provision stating that the arbitrator (not the Court) shall decide whether the agreement is valid and enforceable. In Rent-A-Center, the U.S. Supreme Court determined that such language was valid and binding. The proposed bill currently before Congress would limit the effectiveness of such language and allow an employee the opportunity to argue in Court as to whether the arbitration provision is enforceable when it pertains to a sexual harassment claim.

In the US, arbitration is generally favored by businesses as a less expensive, less time consuming way to resolve disputes than utilizing an over-burdened public court system. In contrast, many social commenters suggest that only courts are capable of dispensing "justice", particularly in cases raising public policy issues such as sexual harassment. Fiss, Against Settlement, 93 Yale L.J. 1073 (1984).

Now, more than ever, consensus seems to be that sexual harassment cases need to be decided in the public forum. Private arbitration is perceived to cover up the problem, in that the proceedings are confidential and the decisions are not publicly reported or available. Arbitration continues to battle a stigma of bias and "old boys' club". Courts are now perceived to be friendlier to claims of sexual harassment, perhaps attributable to more women judges on both the state and federal benches, more women jurors, and more women lawyers. That said, there are plenty of qualified women (and men) arbitrators educated and experienced particularly in employment and discrimination law. In contrast to state and federal judges, who must be generalists and handle all types of civil and criminal claims in turn, arbitrators are specialists and bring strong credentials in their chosen field to the table.

Further, arbitrators are not bound by the rules of evidence, yet are experienced in making the credibility determinations crucial in any sexual harassment dispute. Tough credibility questions have long been the subject of arbitration disputes and the daily fare of arbitrators. Arbitrators can recall witnesses to clarify any points, listen to hearsay evidence, even visit the workplace, and can compile a more extensive record than any trial court would be able to do. Unencumbered by the rules of evidence and other trappings of court, arbitrators can discover facts and get to the truth. The victim, the perpetrator and the company each benefit from resolving the dispute quickly and at less expense than in court. Society benefits and the purpose of Title VII is served because harassment is punished and the arbitration award places everyone in the workplace on notice that this behavior will not be tolerated - whether determined to be predatory sexual misconduct or an unsubstantiated, unwarranted claim.

Nevertheless, for many reasons, the victim may seek to avoid arbitration. Publicity - trial in the court of public opinion - can be one of the main drivers of substantial settlements and scintillating executive terminations. To avoid enforcement of a mandatory arbitration provision in the context of a sexual harassment claim, employees may sue the perpetrator personally, as Gretchen Carlson did with Roger Ailes of Fox News. Employees may argue that the arbitration provision is unconscionable as Phillips did in the Hooters case discussed above. Depending on the outcome of the U.S. Supreme Court decisions concerning arbitrations of class actions, employees may gather together and assert class action claims against alleged perpetrators of sexual harassment or discrimination and perhaps avoid arbitration. Finally, union employees and those subject to collective bargaining agreements may have specific recourse in the context of discrimination claims to avoid mandatory grievance procedures.

Regardless of whether harassment claims are determined in arbitration or in court, the fundamental issues must be addressed in the US workforce by corporate enforcement of existing policies, executive morality clauses, and general common courtesy and respect among workers of both sexes.