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Democrats in step with Google on mandatory arbitration ban

Google employees hold up signs during a walkout rally at Harry Bridges Plaza, Thursday, Nov. 1, 2018, in San Francisco. Hundreds of Google employees around the world briefly walked off the job Thursday in a protest against what they said is the tech company's mishandling of sexual misconduct allegations against executives. (AP Photo/Eric Risberg)

Democratic members of Congress introduced House and Senate bills Thursday that would prohibit U.S. companies from enforcing mandatory arbitration clauses in employment, consumer, civil rights and antitrust disputes.

A ban on compulsory arbitration clauses could hit U.S. companies hard, especially larger firms, which are more likely to require them as a condition of employment.

The Forced Arbitration Injustice Repeal Act of 2019, or “FAIR Act,” is the latest in a long history of proposed bills that have attempted but failed to defang the current statutory and Supreme Court framework maintaining enforceability of mandatory arbitration clauses.

This time around the bills sponsored by Rep. Hank Johnson (D-Ga.) and Sen. Richard Blumenthal (D-Conn.) have the weight of Google’s (GOOGGOOGL) recent decision to wipe out forced arbitration from its employee and direct contractor agreements. A November walkout by more than 20,000 Google employees protesting the company’s handling of sexual harassment claims pushed the company to seriously reevaluate its policy.

“No longer should people be forced to suffer in silence, to endure the unfairness of this kind of rigged system, stripped of their rights and forced to go before a non usual arbiter,” Blumenthal said during a Thursday press conference.

“Forced arbitration has become insidious in the United States as corporations use the secretive system to silence sexual harassment survivors, take advantage of workers and consumers, and undermine public health and safety,” the American Association for Justice, a lobbying organization that has registered to advocate on behalf of bills to defeat mandatory arbitration clauses, said in a statement.

More than half -- 56.2% -- of U.S. private-sector nonunion employees are subject to mandatory employment arbitration contracts, according to a 2017 study conducted by Alexander Colvin of Cornell University’s IRL School.

2011 study, also conducted by Colvin, found average damages awarded in compulsory employment arbitration totaled $109,858, nearly four times less than employment dispute awards – $394,223 – awarded in federal court. Colvin also found that employer-mandated arbitration cases were resolved in the employee’s favor 21.4% of the time, while win rates for employees in court were 36.4%.

Google organizers, along with former litigants forced to handle disputes through arbitration, were in Washington, D.C., to support introduction of the bills. Former Fox News Anchor Gretchen Carlson, who successfully sued and settled a $20 million sexual harassment lawsuit against the late Fox News founder and CEO Roger Ailes, worked with Rep. Cheri Bustos (D-IL) on the legislation.

“Forced arbitration clauses in employment agreements are not designed to achieve fair, expeditious or cost-effective resolutions for sexual harassment cases,” Carlson said in a statement to Yahoo Finance. “I believe every woman and man should be entitled to have their claims adjudicated in a courtroom rather than behind closed doors where victims can never discuss what happened.”

Comparison of outcomes of employment arbitration and litigation

Use of forced arbitration clauses in employment contracts has steadily increased since the 1960s, when state and federal civil rights statutes began expanding protections to U.S. workers. Forced arbitration clauses have been criticized for denying workers the ability to sue their employers to court, including over sexual harassment.

Americans with few choices in the marketplace may unknowingly cede their rights when they enter contracts to buy a home or a cellphone, place a loved one in a nursing home, or start a new job,” Rep. Johnson said in a Facebook post.

The clauses have also become prevalent in consumer services contracts for credit cards, utilities, checking accounts, and debit cards, as well as for payday loans, private student loans, and auto loans.