The problems with mandatory arbitration clauses

| Apr 16, 2018 | blog

In 2017, the Equal Employment Opportunity Commission (EEOC) received 6,696 sexual harassment charges and obtained $46.3 million in settlements for victims of sexual harassment. In Colorado, sexual harassment claims made up 36 percent of the total number of EEOC claims.

In a shift that undermines the progress of labor rights, more employers are choosing to utilize mandatory arbitration clauses to handle harassment disputes. While initially the clauses seem innocuous, they strip away an employee’s legal power.

Understanding arbitration clauses

Arbitration is an alternative dispute resolution method designed to provide resolution without going to court. Proponents argue arbitration is a faster and less expensive way to handle claims. Arbitration is similar to litigation in that parties submit evidence to a third party, known as the arbitrator, who reviews the case and renders a final decision. To make the arbitration process faster, discovery facets and evidence allowed are limited. When a company requires arbitration to handle disputes, employees face a significant disadvantage over employers. Also, disputes settled by an arbitrator leave little room to appeal the decision.

Problems with arbitration

Arbitration comes with several pitfalls for employees. Employees often have difficulty finding legal representation as lawyers tend to avoid arbitrated cases. The aversion to arbitration is based on a financial calculation used by attorneys to estimate potential payouts. The payouts for cases covered under arbitration clauses generally settle for less money.

Mandatory arbitration also continues the cycle of silence and secrecy surrounding sexual harassment cases. This further undermines the pervasiveness of the issue. The verdicts are typically confidential and allow companies to keep their dirty laundry out of the public eye. This creates a sense of isolation for victims of harassment as they are unaware that someone else had a similar experience. Arbitration also prevents victims from fighting an issue together.

Proposed change

The rise of the #MeToo movement led to proposed bipartisan change. For the first time in a decade, every state attorney general in the U.S. worked together to send a letter to Congress which demanded the end of mandatory arbitration clauses for sexual harassment cases. Currently, Congress is considering legislation called the Arbitration Fairness Act which would eliminate mandatory arbitration in employment cases.

When faced with a mandatory arbitration clause in a contract for a new job, most employees will not hesitate to sign. However, an arbitration clause reduces the chance of successfully prevailing against an employer in a dispute later. Before committing your signature, consider what rights you will be signing away.

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