More Employers Turn to Arbitration to Handle Job Claims

Google may recently have stopped requiring arbitration for employee sexual harassment and assault claims, but mandatory arbitration clauses remain the standard for all other employment claims, the Alphabet Inc. subsidiary told Bloomberg Law.

The use of arbitration agreements also is a popular trend for many other employers, with some 60 million workers currently covered by mandatory arbitration provisions.

“We use arbitration for most employment matters in the U.S. We believe this is most effective for all parties involved,” a Google spokesperson said.

Many major employers, including other tech companies that have done away with mandatory clauses on harassment, maintain arbitration agreements for most wage-and-hour and discrimination claims. The use of arbitration clauses to handle employment claims is becoming more prevalent in the workplace, sources told Bloomberg Law.

Plaintiffs’ attorneys and worker advocates are hoping employers will end the practice for all employment claims, saying it’s especially harmful for low-wage workers.

“It’s important for any reforms whether coming from companies or legislative reform to address all employment disputes,” Maya Raghu, director of workplace equality at the National Women’s Law Center, said. “Addressing them in isolation is not the most effective means in achieving reform.”

Who’s Arbitrating

The Economic Policy Institute reports that 56 percent of nonunion private-sector employees are subject to mandatory individual arbitration procedures. That’s roughly 60 million American workers. Of those, 30 percent have signed agreements that include class-action waivers. A total of 1,530 establishments were surveyed, from which 728 responses were obtained, the report said.

The research indicates that employers in education and health, business services, information, and retail trade have the highest rate of mandatory arbitration. The more workers a business employs, the more likely its workers are subject to mandatory arbitration.

Bloomberg Law asked several major companies to respond to questions on whether they have mandatory arbitration agreements with their employees.

• Facebook exempts sexual harassment from its mandatory arbitration policy and is still evaluating its arbitration practices more generally.
• Uber Technologies Inc. and Lyft Inc. allow employees to opt out of arbitration agreements.
• McDonald’s Corp. doesn’t have a mandatory arbitration agreement policy as a condition of employment for corporate or restaurant employees. McDonald’s franchisees may use arbitration as part of their own hiring process.
• Dunkin’ Donuts, owned by Dunkin’ Brands Group Inc., said its chain restaurants are independently owned so local owners are responsible for their own employment policies, a spokesman said.
• Domino’s said it doesn’t mandate that employees agree to an arbitration agreement.
• Macy’s Inc. has its own in-store arbitration process. Its Solutions InSTORE Program incorporates a voluntary arbitration agreement.
• Target Corp. doesn’t require arbitration agreements, including in claims of wage and hour, discrimination, harassment, or assault. Voluntary arbitration agreements have been used in a handful of situations, but not for those employment issues.

Why Employers Choose Arbitration

The U.S. Supreme Court case Epic Systems v. Lewis had a role in exacerbating the arbitration trend over the years. In that case, the court ruled that employers can enforce arbitration agreements signed by workers, even if they bar class-action claims.

David Garland, an attorney for Epstein Becker Green, noted there hasn’t been an increase in clauses for harassment and assault.

Employers and some management-side attorneys stand by the use of these agreements as a more convenient and occasionally faster way to handle employment disputes for both sides.

Google said those proceedings can allow the person who brought the complaint to remain anonymous.

Workers at Risk?

Arbitration clauses are potentially problematic especially for lower-paid workers, Terri Gerstein, of the Harvard Law School Labor and Worklife Program, said. Finding a lawyer to take an arbitration case is difficult because the lower monetary returns make them less worthwhile than court cases.

Workers may sign on to an arbitration clause without even knowing it, she said. They’re often subject to arbitration clauses in the process of applying for a job where it’s a condition of employment.

“It’s not really an agreement in any meaningful sense of the word because people generally are told it’s a take it or leave it situation,” Gerstein said.

Many companies allow a short window of time for employees to opt out of an agreement, which could be as little as 30 days, before they’re stuck with it, she said.

Thirty days is a standard time limit, Ryan Bates, an attorney with Hunton Andrews Kurth, said. “I don’t see that as tricky or deceitful,” Bates said.

The nature of arbitration makes it less likely for a lower-paid worker to bring a claim, Justin Swartz, partner at Outten & Golden, said.

Many agreements require an employer to cover the cost of arbitration. When an agreement doesn’t explicitly prohibit a worker from pursuing a class action, workers may have to foot the bill, discouraging them from going forward.

“There’s no limit to the type of companies that use arbitration,” Swartz said. “Everybody does it now. It eliminates so much potential liability and companies rationalize it protects them from frivolous lawsuits, but it really protects them from all lawsuits.”