With Arbitration, Public Antipathy Clashes With Case Law
Companies face calls to drop mandatory arbitration agreements and a new congressional bill to nullify them

by Doug Chartier

Public pressure continues to build against some companies that use mandatory arbitration provisions. Tech giants and even law firms have come under the microscope in recent months for including them in their employment agreements, with some even dropping the provisions. And since before that, the #MeToo movement has called attention to companies that require workers to arbitrate sexual misconduct and harassment claims out of court.

But the question is what long-term effects, if any, the public pressure will have while companies have leeway to implement those provisions under federal law.

Companies that require their employees and customers to arbitrate claims against them have enjoyed the support of the U.S. Supreme Court’s reading of the Federal Arbitration Act. By including mandatory arbitration provisions in employment or purchasing agreements, many companies have avoided defending costly class actions and instead required more plaintiffs to bring claims against them on an individual basis.

A 2017 study by the Economic Policy Institute found that more than 55 percent of U.S. workers are bound by mandatory arbitration provisions, and about 65 percent of companies with 1,000 or more employees had mandatory arbitration procedures.

But some companies are rethinking those provisions. In February, Google announced it would end its practice of requiring arbitration for any work disputes effective March 21. The decision came after Google employees protested the practice, with 20,000 of them staging walkouts in November.

Other tech companies, including AirBnB, eBay and Facebook, have announced they would no longer require workers to arbitrate sexual misconduct and harassment claims.

The movement against mandatory arbitration has also enveloped law rms. On Tuesday, a group of Harvard Law students demonstrated in front of the Washington, D.C., offices of Big Law firms DLA Piper and Venable to protest their apparent use of mandatory arbitration clauses.

The student group, the Pipeline Parity Project, also called on the National Association for Law Placement to poll law firms on whether they require associates and non-lawyer employees to sign arbitration or non-disclosure agreements, and add those responses to its Directory of Legal Employers.

ARBITRATION PROVISIONS UNDER THE SPOTLIGHT

The growing antipathy against mandatory arbitration is leading more employers than just tech companies to rethink those policies.

“It is a concern for employers,” said John Husband, a management-side labor and employment litigator who is a partner at Holland & Hart in Denver. “I’m sure DLA Piper is looking at their policy right now.”

Husband said many employers are being cautious right now when it comes to mandatory arbitration policies. “If they don’t have [a mandatory arbitration agreement], they’re likely to not have one going forward.”

But Colorado employers that do have those agreements don’t face the same scrutiny as high-pro file employers in Silicon Valley or on the East Coast, Husband added. For example, employers might be more responsive to employee pressure in California, where there’s the Private Attorneys General Act that allows workers to bring a private action against them for labor code violations. “It’s a different environment out there,” Husband said. Still, with workers demonstrating against arbitration provisions, “it doesn’t mean Colorado employers aren’t watching that,” he added.

While arbitration can help large companies reduce their legal exposure to various claims, it also has its drawbacks, and companies should be thoughtful about how they implement them, Husband said.

To read this story and other complete articles featured in the April 1, 2019 print edition of Law Week Colorado, copies are available for purchase online.