By Rakeen Mabud
Last week, the U.S. House of Representatives delivered a blow to the unjust practice of mandatory arbitration by passing the Forced Arbitration Injustice Repeal (FAIR) Act by a margin of 225-186. The legislation, which will now move to the Senate, would ban the use of mandatory arbitration clauses – also called forced or private arbitration clauses – in employment and consumer contracts.
Right now, 60 million workers – and an untold number of consumers – have signed away their rights to sue in the case of a dispute, often without even knowing they have done so. The FAIR Act would reform the current legal architecture by allowing employees to bring their cases to court, instead of allowing their employer to oversee the resolution. This shift is especially significant for those who often have the least power at work: women and people of color.
Here’s how it works: Mandatory arbitration requires workplace disputes from issues ranging from wage theft, overtime violations, and sexual harassment to be resolved in closed-door meetings. Employers get to pick the “independent” arbiter to decide the case, as well as any rules or policies that need to be followed. When paired with non-disclosure agreements, as these arbitration clauses often are, mandatory arbitration prevents working people from discussing problems and settlements, even if they are widespread.
Mandatory arbitration, therefore, effectively allows employers to act as judge and jury in cases where they are accused of being in the wrong. It is therefore no surprise that research has found that workers are less likely to win their case in private arbitration, and even when they do win, they receive smaller payouts.
The good news is that people are making noise. Much of the public advocacy around mandatory arbitration has been among highly paid employees, in the tech sector and beyond. In February, Google employees organized massive walkouts to protest the practice and call attention to widespread sexual harassment at the company. In response, Google announced that it would end forced arbitration for sexual harassment cases, though the policy change still left out thousands of contracted workers, as I wrote earlier this year.
The use of arbitration has been a significant barrier for the #MeToo movement to overcome. Fox News Anchor Gretchen Carlson, who sued then-CEO Roger Ailes for harassment in 2016, had signed a private arbitration clause, as had Susan Fowler, an Uber whistleblower who wrote about the entrenched sexual harassment at the company. (Uber has since allowed workers to opt out of private arbitration clauses in their contract.) But the issue goes beyond sexual harassment: IBM employees faced forced arbitration when they brought up age discrimination claims; and a Macy’s employee confronted arbitration when he claimed American Disability Act (ADA) violations.
But what gets much less attention are the insidious ways in which mandatory arbitration affects women and people of color in lower-wage jobs. A study by the Economic Policy Institute found that private arbitration agreements are used most widely in education, health, and retail – sectors that disproportionately hire women and people of color.
The sad truth is that those with the least power in their workplaces – who are earning little, who are more likely to be subject to wage theft, overtime violations, sexual harassment and discrimination, and who are least likely to have the legal resources to know to opt-out of an arbitration clause – are the most likely to be silenced under this widespread practice. Senate passage of the FAIR Act would go a long way in addressing these inequities.
However, the Act is not a silver bullet fix to entrenched power imbalances at work. Employers continue to misclassify workers, which denies them key benefits and protections. For example, Uber has come under criticism recently for the preposterous claim that drivers are not a core part of their business.
The FAIR Act must therefore be paired with other reforms that increase worker power. This should include: doing away with non-disclosure agreements, truly enforcing anti-retaliation laws, and allowing workers to build the institutions, such as unions, that would help them navigate a system that is too often deliberately opaque and built in favor of employers.
Issues such as sexual harassment, wage theft, or discrimination – to name a few – are not isolated problems. They come together to hold people back, demeaning the value of people’s labor and norms of respect and dignity.
The widespread use of mandatory arbitration is just one example of how companies have written the rules in favor of employers. The Senate’s passage of the FAIR Act would be an important step to rebalancing power in the workplace, but Congress should not lose sight of the broader architecture that continues to uphold an imbalanced economy and unfair labor practices. To truly ensure workplaces are safe and fair, a comprehensive approach to reforming the laws and institutions that disempower workers is necessary – banning mandatory arbitration is simply one piece.