(Arbitrator and NAA Member, Charles Ammeson, comments on the recently introduced Ending Forced Arbitration of Sexual Harassment Act of 2017).

On December 6, 2017 Senators Gillibrand and Grahm introduced the Ending Forced Arbitration of Sexual Harassment Act of 2017 (EFASHA).  Former Fox News Anchor and Miss America Chairwoman, Gretchen Carlson, takes credit for introducing the legislation.  On December 19, 2017, Microsoft Chief Legal Officer, Brad Smith, announced Microsoft’s decision to eliminate its arbitration clause in sexual harassment and gender discrimination cases, acknowledging such elimination affects less than 1% of its employees.  “Forced Arbitration” has garnered another opposing constituency.

The New York Times reported on these matters on December 19, 2017, at times taking critical aim at “forced arbitration”, and at times taking aim by lumping “forced arbitration” and “voluntary arbitration” together. There is a clear distinction between “forced arbitration” and “voluntary arbitration”, and the concerns posited.

Although the New York Times and Carlson properly point out that many “forced arbitration” clauses include “confidentiality agreements” prohibiting disclosure of specific complaints or their resolution; and properly conclude that forcing secrecy on sexual harassment and discrimination claims is antithetical to exposing wide-spread misconduct, the solutions proffered generally, and specifically by the EFASHA, tend to undermine many of the distinguishing benefits that a properly and fairly designed arbitration procedure affords over litigation.

Senator Graham voiced understanding that the critical issue in these matters is the forcing of secrecy and arbitration procedures, and not arbitration itself, stating “I do not oppose arbitration – if the parties willingly consent to the process.”  Carlson seems to understand the distinction as well, stating that  Forced Arbitration is the harasser’s best friend.” The EFASHA, however, is not crafted with such precision.  Instead of eliminating “confidentiality” or “secrecy” provisions in “forced arbitration” agreements, the EFASHA voids all aspects of such agreements.  Instead of promoting fairness and due process in “forced arbitration” it voids agreements and presumably awards.

Although the EFASHA provides that Courts will ultimately decide whether matter such agreements are void and disputes arbitrable, consistent with precedent, it leaves arbitration proceedings voidable after-the-fact, even if not challenged before or during the arbitration proceeding.  Such uncertainty unnecessarily undermines other core benefits of arbitration procedures such as expediency, cost efficiency and finality.

Although the EFASHA leaves intact labor arbitration under collective bargaining agreements, it allows a second bite at the apple for statutory claims, which also undermines the same core benefits of arbitration, and fails to consider the complication of reconciling resolution of statutory claims and broader “just cause” claims typical in collective bargaining agreements.  Thus, although it recognizes that labor arbitration pursuant to collective bargaining agreements is “voluntary arbitration”, it significantly undermines many of the benefits of such “voluntary arbitration.”

Other considerations come in to play as well.  Although some victims of harassment and discrimination have well-paying jobs and the fortitude and economic means to fight publicly for just resolution, not all claimants share these benefits.  The fact of the matter remains that court litigation is not an economically viable alternative for all victims and in many circumstances, arbitration provides the only viable forum for a claimant. Beyond this, arbitration in the collective bargaining context allows for remedies not typical in court litigation, which certain victims may prefer, such as reinstatement.

Although premier arbitration organizations, such as the National Academy of Arbitrators and the American Arbitration Association have chosen not to take sides on the issue whether “forced arbitration” may be required as a condition of employment, both organizations have consistently taken the position that “voluntary arbitration” is always preferable and more desirable.  Instead, they have focused their efforts on developing and mandating guidelines and protocols to ensure systemic fairness in arbitration procedures and outcomes.  It is suggested that legislators do the same.  It is suggested that legislators consider and include the broader group of constituencies affected by “forced arbitration.”  It is suggested that legislators consider the concerns regarding “forced arbitration” upon victims of sexual harassment from the perspective of victims at all pay levels, as opposed to reacting to the concerns of highly compensated executives.  As acknowledged by Microsoft, only 1% of its employee are affected by “forced arbitration.”

Prior legislators have long recognized that “fairness” is the primary concern, and not whether parties select to proceed in a court or arbitration setting. Proposed Fair Arbitration Acts modifying the Federal Arbitration Act and State Acts date back decades.  These acts have generally recognized that the essential tension is the freedom of the parties to contract within reasonable market constraints, but free from overreaching by a dominate party because of circumstances.  To date, these acts have generally failed enactment.  Perhaps because the different constituencies have promoted change separately.

The present advocacy against “forced arbitration”, spurred by recent societal acknowledgement of institutionalized misconduct, appears to have properly reinvigorated legislative review of the concerns.  However, it is suggested that drafting an imprecise statute, in a rush to serve a limited constituency with immediacy, rather than all constituencies, could well set in motion unintended consequences.

Although the identified issues and concerns surrounding “forced” secrecy, confidentiality and procedures that are less than fair or which fail to adhere to essential precepts of due process merit serious and prompt consideration, the initial iteration of the EFASHA takes a narrow and short-sighted approach to broader concerns.

Moreover, instead of limiting remediation of arbitral concerns to victims of sexual harassment, it would be prudent to address the impact of “forced arbitration” on the broadest set of constituencies and claims affected – consumer claims, all employee claims and more.

In conclusion, it is not suggested that consideration and resolution of the issues proffered by the EFASHA is not warranted or a step in the right direction.  It is simply suggested that the interests of all constituencies be advanced together, in a manner that will avoid unintended consequences.  This can best be accomplished by involving those experienced in resolving such claims — experienced advocates and neutrals as well.

One suggested model for consideration is the Employment Due Process Protocol, which has been endorsed by organizations representing a broad range of constituencies, including the American Arbitration Association, the American Bar Association Labor and Employment Section, the American Civil Liberties Union, the Federal Mediation and Conciliation Service, the National Academy of Arbitrators, and the National Society of Professionals in Dispute Resolution.