Ex-Fox anchor Gretchen Carlson says corporations use arbitration to hide 'dirty laundry'

Gretchen Carlson speaks at a press conference calling for an end to forced arbitration on Capitol Hill in Washington, U.S., December 6, 2017. REUTERS/Aaron P. Bernstein
Gretchen Carlson speaks at a press conference calling for an end to forced arbitration on Capitol Hill in Washington, U.S., December 6, 2017. REUTERS/Aaron P. Bernstein

Former “Fox & Friends” anchor Gretchen Carlson and other witnesses spoke out before a Congressional panel on Thursday against forced arbitration clauses that keep employment complaints and other disputes out of court.

“Forced Arbitration is a harasser’s best friend because it forces the cases of women who are facing harassment or any other kind of gender discrimination into a secret chamber where no one ever knows what happened to them,” Carlson said in a statement provided to Yahoo Finance after the hearing.

During Thursday’s hearing before the House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law, Carlson said that corporations use forced arbitration to hide their “dirty laundry.” Carlson is deeply familiar with the issue: She filed a sexual harassment suit against Fox that ended with a $20 million settlement in 2016 and the ouster of the late Fox CEO Roger Ailes.

Since then, Carlson has advocated for outlawing mandatory arbitration. Legislation in both the House and Senate would make such clauses illegal in contracts for employment and for access to consumer-facing goods and services.

‘Unavoidable and deeply unpopular’

Another witness, former senior litigation counsel for Consumer Financial Protection Bureau, Deepak Gupta, said only Congress can fix what’s become of the nation’s arbitration laws.

“Forced arbitration is unavoidable and deeply unpopular. It's everywhere — you can't avoid it, not if you want to live in modern society, not if you want a mobile phone, or a credit card, or a bank account,” Gupta said. “And increasingly, you can't get a job unless you give up your right to hold your employer publicly accountable for sexual harassment or assault, for discrimination, or wage theft.”

“What forced arbitration really does is it replaces the laws that are written by Congress with private legislation written by corporations of contracts into the fine print of contracts that nobody reads and that nobody can negotiate,” Gupta said. “That is not what's supposed to happen in a democracy. Forced arbitration also robs us of our constitutional right to a jury trial.”

The House Committee is one of several congressional committees considering whether to undo a series of Supreme Court decisions that together interpret the Federal Arbitration Act (FAA), enacted in 1925, to permit forced arbitration.

Jerrold Nadler headshot, as US Representative of New York and chair of the House Judiciary Committee, graphic element on gray
Jerrold Nadler headshot, as US Representative of New York and chair of the House Judiciary Committee, graphic element on gray

Rep. Jerry Nadler (D-NY) and other witnesses said the court had stretched the Act beyond its original intent, which was to provide for voluntary arbitration between parties with equal bargaining power.

“All of these arbitration clauses, almost, are contracts of adhesion,” Nadler told lawmakers. “When you want to get a credit card, try crossing out the fine print — if you can find it without the magnifying glass — that says that you will settle all disputes in arbitration. Cross it out, see if you get the credit card, see if you get the bank loan, if you can get the mortgage. See if you get the car loan. You have no choice.”

‘Companies can evade the court system’

The FAIR Acts in the House and Senate would amend the FAA to bar mandatory arbitration clauses in employment and consumer agreements, and restrict such agreements in civil rights and antitrust matters.

“By burying a forced arbitration cause deep in the fine print of a take-it-or-leave-it consumer and employment contracts,” he said, “companies can evade the court system where plaintiffs have far greater legal protections.”

Andrew Pincus, a partner in the law firm Mayer Brown L.L.P., presented the position of the U.S. Chamber Institute for Legal Reform (ILR).

“Consumers and employees do as well or better in arbitration as in litigation,” Pincus said, citing a study commissioned by the ILR. In comparing cases handled in federal court versus in arbitration, Pincus said, the study found employee plaintiffs in arbitration won three times as often, and recovered approximately twice the damages. Pincus lauded arbitration as offering more flexibility and lower attorney costs.

Rep. F. James Sensenbrenner, Jr. (R-WI) ranking member of the subcommittee, said eliminating arbitration would enrich trial attorneys, though also expressed concerns over limiting the practice.

“Limiting or fully eliminating arbitration would have a profound chilling effect on justice,” Sensenbrenner said, reasoning that the expense of lawyers would discourage the pursuit of small claims, plus harm consumers because businesses would pass on litigation costs.

According to Gupta, most Americans do not share Sensenbrenner’s concern.

“Americans hate forced arbitration,” he said, adding that more than 80% of Republicans, Democrats and Independents support legislation to end forced arbitration. “In our hyper-partisan times, that opposition is remarkably bipartisan.”

On the consumer side, Gupta said arbitration fails to accomplish what its proponents represent. During a two-year period, he testified that a total of four plaintiffs seeking relief through the nation’s leading arbitration forum won affirmative relief on claims of $1,000 or less.

A study conducted by Cornell University covering cases handled between 2003 and 2007, showed employer-promulgated arbitration cases resulted in a win for employees 21.4% of the time, which was lower than employee win rates for cases pursued in court. Of the cases won by employees, average awards were substantially lower than awards reported in employment litigation.

Alexis Keenan is a New York-based reporter for Yahoo Finance. She previously produced and reported for CNN and is a former litigation attorney. Follow on Twitter @alexiskweed.