The end of ‘forced’ arbitration isn’t the beginning of corporate transparency

Employers will no longer be able to require arbitration for employees claiming sexual harassment or assault after the president signs the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, a bill the #MeToo movement inspired.  

Many will laud this bill for eliminating “forced” arbitration of sex-based claims. Passage of this bill is an incredible — and arguably surprising — demonstration of true bipartisanship with a 335–97 vote in the House and an overwhelmingly supportive voice vote in the Senate. Indeed, without the support of at least 10 Senate Republicans, the bill would not have become law.  

What makes the success of the Ending Forced Arbitration Act all the more extraordinary is that Congress has repeatedly failed to pass similar, albeit more all-encompassing, bills attempting to limit the use of pre-dispute arbitration agreements. But the dam has now broken, and this bill may well be the harbinger of things to come for pre-dispute arbitration agreements involving other employment claims more generally. In fact, the Executive Branch’s Statement of Administration Policy indicates that the president is interested in working with Congress on broader legislation that would eliminate pre-dispute agreements requiring arbitration of claims involving race discrimination, wage theft and unfair labor practices.  

But is the enactment of this law the victory that supporters  —  including avid and vocal supporter, former Fox News journalist Gretchen Carlson  — claim?  

Over the years, a process initially called arbitration became “mandatory” arbitration and now, “forced” arbitration. However, the arbitration clause in typical consumer and employment agreements is no more forced than any of the other terms. To be sure, when the use of pre-dispute arbitration agreements exploded in the early 1990s, criticisms of arbitration were fair, as many employers wrote biased and unconscionable pre-dispute arbitration agreements. Even so, such criticisms are largely inapt today. With prodding from the federal courts, the majority of pre-dispute arbitration agreements now designate reputable provider organizations, like the American Arbitration Association and the International Institute for Conflict Prevention and Resolution, to administer their arbitral processes. Not only does this ensure procedural fairness, including unbiased and conflict-free arbitrators to decide cases, but the arbitral process is also typically free to employees. Moreover, the process is considerably more accessible to many because an employee need not be represented by a lawyer in arbitration.  

So, why eliminate a fair process? Carlson and others have complained that the arbitration process is confidential and that, as a result, victims are precluded from having their day in a public court setting. While the arbitral hearing itself may be confidential, arbitration rules do not preclude disputants from speaking with the media about their cases. It is only if a claimant signs a nondisclosure agreement (NDA) that they will be prevented, by their employer, from speaking to the media. But such NDAs are typically part of settlement agreements between employers and employees in litigated matters, as well. Because it is rare for a case, whether litigated or arbitrated, to make it all the way to a hearing, an NDA will likely prevent widespread dissemination of the underlying facts, independent of which path the parties pursue.  

The newly enacted legislation is giving false hope to employees who want to create greater visibility into claims of corporate wrongdoing. Employers and businesses will continue to settle most sexual misconduct disputes and continue to render employees voiceless. Arbitration is not the problem — settlement with nondisclosure agreements is. 

Professor Sarah R. Cole is the Michael E. Moritz Chair in Alternative Dispute Resolution at the Michael E. Moritz College of Law at the Ohio State University. Cole is the author of many articles about arbitration and is an arbitrator.