The #MeToo movement cast a cloud over corporate America’s
1. Why are companies renouncing arbitration?
In many cases, it’s a response to being in the hot seat. Microsoft Corp. announced its new policy days after
2. How does mandatory arbitration work?
It’s a dispute-resolution process that over the last decade has been adopted by more than half of U.S. companies to settle worker grievances of all kinds as an alternative to litigating in court. Evidence is presented, and witnesses give their accounts just like in courthouse suits, but cases are decided by privately appointed arbitrators, who act as both judge and jury. Proceedings are conducted out of the public eye, and parties generally are required to keep the outcome secret.
3. What are its pros and cons?
Some studies have concluded that arbitration is speedier and less costly than a trial. It also allows victims to maintain their privacy. Women’s rights attorney Gloria Allred, who has represented hundreds of harassment victims in private settlements, has said many of her clients appreciate confidentiality. Critics say that arbitration is stacked against workers. A 2015 study found employees prevail only about a third as often in mandatory arbitration as in federal courts, and when they do win damages, the typical payout is a fifth of what it is in those courts. Some women’s rights advocates contend that arbitration of harassment claims helps companies cover up employee misconduct. They point to a
4. What sparked the backlash against arbitration?
Allegations of sexual harassment by Hollywood producer Harvey Weinstein cast a spotlight on his use of nondisclosure agreements to buy the silence of some of his accusers. But a 2017 proposal in Congressto bar mandatory arbitration in sexual-harassment complaints was inspired by a case filed against Signet Jewelers alleging systemic abuse of hundreds of women who worked for the company’s retail chains. The complaint against the company was made in 2008, but the disclosure in 2017 of hundreds of related documents
5. Will the new company policies send employees racing to court?
Up to a point. The
6. Will Wall Street firms also drop arbitration?
Until recently, the answer was: Don’t hold your breath. Financial companies were among the earliest to adopt mandatory arbitration. The secrecy of the process, combined with the use of non-disclosure agreements, has kept complaints in the industry largely
7. Will arbitration be banned through federal law?
Three Democrat-led states, New York, New Jersey and California, blazed an early path to restrict arbitration, but legal experts say those measures probably will succumb to ongoing court challenges by business groups because the Federal Arbitration Act preempts state laws. Federal statutes don’t face the same procedural hurdle; the bigger issue is whether a divided Congress has the political will to overhaul the employment grievance process. A 2017 bill to bar the use of arbitrationin sexual-harassment cases failed to pass, despite being jointly sponsored by liberal Democrat Senator
The Reference Shelf
- A Bloomberg Businessweek
guide, “How to Break an NDA, Confront a Colleague, and Other Office Tips.”
- The American Arbitration Association’s rules and procedures.
- A QuickTake on
understandingwhat is and isn’t sexual harassment.
- How activists
loosenedWall Street’s grip on forced arbitration.
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