February 24, 2022

President Biden is expected to sign a bipartisan bill making mandatory arbitration clauses voidable by individuals pursuing claims arising from sexual harassment and sexual assault.  While some states, like California and New York, already ban such clauses, the legislation applies to employers across the country. The new bill has many practical implications for employers defending against harassment claims, but its biggest impact may be on unhealthy work cultures and the ability of senior leaders to ignore harassment problems.

What is mandatory arbitration?

Mandatory binding arbitration is a private proceeding to settle disagreements between two parties. They have become common in employment agreements and require that employee claims be decided by a third party—called an arbitrator—rather than a jury. A Trump-era ruling by the National Labor Relations Board had permitted arbitration agreements to include clauses requiring workers to keep the proceedings confidential. In effect, these were gag provisions that prevented employees from talking about their claims or what had happened to them. Presumably, these confidentiality provisions will fall if and when claimants choose to void arbitration provisions.

While confidentiality clauses can serve many legitimate purposes for both the employer and claimant, they can also be used as a tool to sweep harassment problems under the rug. And that has real consequences for how harassment issues are handled. Publicly answering misconduct is painful, but it’s often part of the process needed to change management practices and work cultures that foster, or at least permit, harassment to continue. And there’s clearly work to be done.

The EEOC’s 2016
task force report on the study of harassment in the workplace found that:

  • Roughly three out of four individuals who experienced harassment never even talked to a supervisor, manager or union representative about the harassing conduct.
  • Employees who experience harassment fail to report the harassing behavior or to file a complaint because they fear disbelief of their claim, inaction on their claim, blame, or social or professional retaliation.

And a 2021 workplace harassment survey by AllVoices reported that:

  • 34% of respondents have left a job because of unresolved harassment issues and 26% have remained at a workplace despite there being ongoing issues of harassment.
  • 50% said they have reported harassment; 18% said that even though they experienced or witnessed harassment, they did not report it for fear of retaliation, that nothing would be done about it, or that they wouldn’t be believed.

Ultimately, the true cost of harassment is much higher than the considerable legal fees, settlement costs and verdicts an organization may pay. The bigger threat to the long-term success of organizations may lie in lower employee morale and productivity, higher turnover, and recruiting and retention challenges associated with an unhealthy work culture.

All of this makes it more important than ever to take workplace harassment seriously and create an environment where issues are quickly surfaced, addressed and resolved. This includes ensuring anti-harassment policies, processes, practices and training are up to date, prioritizing respectful, inclusive behavior as a work skill, educating all employees on how to recognize different forms of harassment, and encouraging a speak-up culture. Because one thing is clear. More change and transparency are coming – at least to arbitration clauses.

Traliant Insight

A bipartisan bill that ends forced arbitration for individuals who are targets of sexual harassment and sexual assault is expected to be signed soon by President Biden. The bill represents an important change in the way organizations handle harassment allegations.  “Sunlight is said to be the best of disinfectants,” Supreme Court Justice Louis Brandeis wrote over a century ago, and that may be the case here.