Companies See Publicity Opportunity in Dropping Arbitration After #MeToo

Tech companies not likely dropping mandatory arbitration because of legal pressure

Facebook, Google and Uber have more in common than all being tech companies that have achieved dominance in Silicon Valley despite not existing two decades ago. Each has also announced this year that they will no longer require employees to agree to mandatory arbitration for sexual harassment claims. Facebook is the latest to make the announcement. Google had also made the change earlier this month after thousands of the company’s employees in offices across the world staged a walkout to protest the revelation that Android co-founder Andy Rubin received a $90 million exit package to leave the company in 2014 after a woman accused him of sexual misconduct. 

But the move probably has less to do with corporations suddenly finding themselves on any shakier legal ground for compelling arbitration than with it being an easily implemented, PR-friendly way to jump on the #MeToo movement. 

“It’s an easy ‘give’ in the sense that it’s a concrete change that can be implemented immediately,” said Rachel Arnow-Richman, a professor at the University of Denver Sturm College of Law. She said companies shouldn’t get too much credit for the change because sexual harassment claims represent the tip of the iceberg of problems with workplace discrimination, and eliminating arbitration in only that context doesn’t affect compelled arbitration for other disputes. 

“Is this a publicity stunt? In a way, yes, because it’s responding only to the one type of problem that’s been the hot-button issue and the focus of media discussion right now.” She added that if employers were serious about ending mandatory arbitration, they would get rid of it for all employment disputes.

The ways arbitration can stack the deck in favor of companies and against individuals has made news quite a bit with court rulings and attempted legislation revisiting whether to allow mandatory arbitration in a wide range of disputes, from consumer banking to employment disputes. Arnow-Richman pointed out Google was the first company to make headlines for facing a major coordinated walkout by employees as a protest over how the company handled allegations of sexual misconduct against a former high-level employee.  

Despite that, she said she doesn’t believe the tech companies’ decision to do away with mandatory arbitration is necessarily driven by anything distinctive about the nature of tech companies in particular. 

“I don’t think it’s about a tech company so much as it is that Google’s the one under pressure,” she said. 

She added companies built on innovation that brand themselves as “lifestyle” companies — such as many in Silicon Valley — face pressure to live up to the mold of agile responsiveness they themselves created.  

“They are not only being evaluated through that lens, they created that lens,” Arnow-Richman said. “So it wouldn’t surprise me that they might have more of a sensitivity to that.” She added there would be a certain irony in companies that see themselves as cutting-edge in the business they do, but fall short in complying with laws aimed at equity in the workplace. 

Victoria Aguilar, founder and managing partner of The AR Group, drew a slightly more direct line between some of the characteristics associated with tech companies and pressure to meaningfully address problems related to inclusion, mandatory arbitration included. Silicon Valley-type companies have been notorious for their lack of diversity, but as they grow, Aguilar said she believes pressure from rank-and-file employees who are impacted most by diversity and inclusion issues has reached a point that executives can no longer ignore. 

“I don’t necessarily need the treehouse,” Aguilar said in reference to workplace perks such as on-site gyms and game rooms that companies tend to tout as examples of why they’re unconventional and cutting-edge places to work. “I do need to be valued for my contributions, regardless of my gender.” 

Approaches that aren’t conducive to transparency such as mandatory arbitration for employment disputes, Aguilar said, is a way for the companies to perpetuate myopic understandings of how uneven the playing field still is. 

She said employees may understand “this hiding behind arbitration, the lack of transparency, is further facilitating the lack of inclusivity and diversity within the workforce, so change that stuff, and then you’ll have to confront the skeletons in the closet. … And so it’s become a movement.” 

The Legal Environment Around Arbitration 

Looking past the veneer of positive public relations, Arnow-Richman said there’s not a lot of actual legal pressure on companies to drop mandatory arbitration.  

The underlying dispute doesn’t usually have bearing on whether an arbitration agreement is enforceable. Courts look at the process by which the agreement was reached, she said. Under the Federal Arbitration Act, courts have to enforce valid arbitration agreements. The law limits courts’ review to whether arbitration agreements have any defects that make them invalid. In other words, whether it’s a valid contract.  

In May, the U.S. Supreme Court put out a long-awaited decision in Epic Systems Corp. v. Lewis. The ruling affirmed the ability of companies to have agreements that bar employees from bringing collective action. According to the decision, the National Labor Relations Act doesn’t prohibit arbitration agreements that contain class waivers that the FAA covers. 

Under a decision by the Sixth Circuit Court of Appeals released shortly after, Gaffers v. Kelly Services, Inc., the enforceability of arbitration agreements also applies to independent contractors. 

Because courts have to apply laws in their current form, significant shifts in approaches to using arbitration have to come from Congress instead. And laws can limit arbitration without prohibiting it altogether, such as the possibility of limiting confidentiality. 

Arnow-Richman explained confidentiality can benefit victims in that they don’t have to fear all the details about the experiences they’ve gone through being aired out publicly. But disclosure could pertain to details such as who the defendant is and how many claims have been brought against them, she said. 

Aguilar said she’s surprised Facebook didn’t shift away from mandatory arbitration as part of new unconscious bias training the company made available publicly on its platform in 2015.  

“They became the leader not only within tech, but in the private arena, in diversity training,” she said. “They literally redefined what diversity and inclusivity training needs to look like. … I think Facebook is really understanding that they’ve got a problem; they’re trying desperately to change the culture through education and information.”

— Julia Cardi

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