Ending Forced Arbitration of Race Claims Is New Diversity Focus

Worker advocates are hoping to build on the success of the #MeToo movement to further curtail a procedural tactic they say creates an uneven playing field against employees with race discrimination claims: mandatory arbitration.

The height of the #MeToo movement in 2017 saw some of the biggest US corporations—including Facebook Inc., Alphabet Inc.’s Google, and Wells Fargo & Co.—ending forced arbitration of sexual harassment-related complaints. Those changes led to increased scrutiny for other workplace issues such as promotion and the gender pay gap.

Three years later, the Black Lives Matter movement that followed George Floyd’s death in Minneapolis police custody prompted bold promises by major companies to address racial inequality in the workplace.

But where #MeToo resulted in legislation outlawing mandatory arbitration of sexual harassment and assault claims, the racial diversity pledges tied to Black Lives Matter have started to fizzle.

And no major employer has said it would stop using mandatory arbitration pacts to keep workplace racial bias accusations out of court, legal scholars noted.

Up Sides & Down Sides

Last month, Rep. Hank Johnson (D-Ga.) and Sen. Cory Booker (D-N.J.) introduced the Ending Forced Arbitration of Race Discrimination Act (H.R. 3038/S.1408), which would give workers the option of bringing their racial bias claims to court even if they initially agreed to arbitrate such workplace disputes.

Passage will be an uphill battle, but some see the bill as a way to tilt the balance of power and allow workers to use class actions to stop race discrimination in the workplace.

“It would be highly significant and definitely shake up the legal landscape” for employees, said Jean Sternlight, a law professor at the University of Nevada who specializes in conflict resolution. “I am not, by any means, an opponent of arbitration. But what I and other critics of mandatory arbitration believe is that arbitration can work well but it should be chosen knowingly by the parties.”

Employers increasingly have been using mandatory arbitration clauses to insulate themselves from discrimination and other legal workplace disputes in court, thanks to a series of US Supreme Court decisions over the past 30 years that upheld the enforceability of these pacts, Sternlight said.

But those who support mandatory arbitration agreements like Kerri Wright, a principal at Porzio, Bromberg & Newman PC, argue that the alternative dispute resolution process is more time- and cost-efficient than traditional litigation, and therefore benefits everyone involved.

The bill “presumes that arbitration is bad for employees but in my experience, I don’t see it that way,” Wright said.

‘Hands Are Tied’

Critics argue that mandatory arbitration prevents the public from learning what’s happening in the workplace, enables employers to avoid accountability, and removes the possibility of precedent-setting litigation.

In many instances, workers wind up dropping their allegations because lawyers are reluctant to take on a client subject to a mandatory arbitration clause, said Judie A. Saunders, a partner at ASK LLP.

“Even though there’s the will to want to help a potential client, and you think there could be a valid claim, if there’s an arbitration clause, our hands are tied,” said Saunders, who herself is a trained neutral and serves as an arbitrator and mediator with the American Arbitration Association and International Institute for Conflict Prevention and Resolution.

That’s especially true for plaintiff-side attorneys who rely on contingency fees, said Alexander J.S. Colvin, a professor of conflict resolution at Cornell University, who has studied the impact of mandatory arbitration. He’s found that employers are more often the victor in forced arbitration than in the courts.

“Those potential winnings are much less in mandatory arbitration. So for the plaintiff’s attorney, it’s harder to take on a case,” he said.

Streamlined Process

For Wright, the time savings alone justify arbitration of workplace disputes.

“I’m located in New Jersey and our court system is understaffed and overpacked, which is the case in a lot of states,” she said. “That leads to cases taking years to make their way through the court system.”

Discovery in employment-related cases could take more than a year, Wright said. That’s the average time—or even less—that it would take for a case to be resolved through arbitration, she said.

Arbitration also helps to weed out weak claims, Wright said.

In some instances, judges allow cases to go before a jury on the basis that the allegations are “serious,” she said.

“In these types of cases, the allegations are always serious,” Wright said. “But if there’s no evidence to support them, that’s the gatekeeper function judges really need to hold and not all judges will.”

But courts already have procedural tools to sieve out feeble allegations, Sternlight said. “There are procedures that can be used by defendants to have those claims dismissed sooner rather than later.”

Diversity Woes

Worker advocates see another reason to avoid mandatory arbitration of race discrimination claims: the arbitration field remains dominated by White men.

This means racial bias claims aren’t being heard by arbitrators who reflect the diverse backgrounds and life experiences of the US workforce, they said.

Arbitrator rosters are first selected and compiled by ADR service providers. The parties to an arbitration then narrow down that list until they reach a consensus on the arbitrator overseeing their case.

Arbitrators who are accomplished in their field and well known—like jurists or Big Law attorneys—are prioritized, legal observers said. That means women and people of color, historically underrepresented in those areas, are often excluded.

The Johnson and Booker bill is a “tangible and viable way for companies” to build on the commitments they made following Floyd’s murder in 2020 “and not offer lip service,” Saunders said.