The Supreme Court “dealt a potential blow” to the #MeToo movement against sexual harassment on Monday. In its ruling in connection with three separate wage and hour dispute cases, the court held that employers can legally require – as a condition of employment – that potential employees waive their rights to participate in class action lawsuits. This means that employers may keep employees from joining together in wage and hour disputes, and instead, force them to deal with such matters via arbitration (an alternative dispute resolution) or in court as an individual, not part of a group.
The main case, Epic Systems Corp. v. Lewis, tasked the court with determine whether the National Labor Relations Act (“NLRA”) prohibits the enforcement of an agreement requiring employees to resolve disputes with the employer through individual arbitration?
In a 5-4 decision authored by the newest Supreme Court Justice Neil Gorsuch, the court held that “Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.”
Each of the three cases arose after an employee who had signed an employment agreement that contained an arbitration provision filed a lawsuit in federal court, seeking to bring both individual and collective claims. The employers argued that, under the terms of the arbitration agreements, the employees were required to handle the matters by way of individual arbitrations (as a result of contract provision banning class action lawsuits).
As Washington, DC-based political publication Politico’s Andrew Hanna and Josh Gerstein aptly noted, “None of the cases at issue concerned sexual harassment — and sexual harassment claims, though often impeded by mandatory arbitration clauses, have not typically been pursued in court as class action cases.” Nonetheless, Hanna and Gerstein stated, “Monday’s ruling could strengthen legal arguments that employment contracts that impose mandatory arbitration on complaints of any kind do not violate constitutional rights.”
A significant reason why sexual harassment continues to permeate workplaces, including fashion ones, as we noted early this year, is tied to how claims of wrongdoing are handled procedurally. No small number of companies require individuals, as a condition of their employment, to sign contracts that contain a mandatory arbitration clause. Such a provision stipulates that the employee will be required to resolve a dispute with his/her employer, including charges of sexual harassment, through arbitration and thus, not before a court of law.
Arbitration differs, in part, from formal litigation in that its proceedings are private (meaning that third parties cannot attend arbitral conferences and hearings), and in some cases, are completely confidential, thereby obscuring information about the proceedings from the public. More often than not, the participants in an in-house arbitration are forced to sign confidentiality agreements as a prerequisite to the settlement of the claims.
Many employment contracts also include class action waivers, which is what the Supreme Court upheld that validity of this week. This are contract provisions that: 1) require employees to agree to refrain from filing class action lawsuits; 2) require them to, instead, handle legal matters by way of arbitration; and 3) require employees to handle such matter via arbitration on an individual basis, i.e., not with other employees.
Companies that have class action waiver provisions in their employment contracts have argued that there are benefits to requiring employees to bring claims individually: “Claims are better settled on a case-by-case basis, thereby, resulting in quicker and more efficient decisions,” as noted by NPR.
The flipside, which has been argued by no small number of workers’ rights advocates, is that by requiring employees to make their cases in individual arbitrations, “the process often isolates workers from each other, when they most need the resources and information-sharing so crucial to establishing patterns of misconduct.”
Companies’ large-scale reliance on quiet arbitrations, including the usage of class action waivers has enabled sexual harassment to become institutionalized in corporate culture, according to lawmakers and researchers, alike.
The potential good news at play: The implementation of arbitration requirements and class action waivers in employment contracts is completely optional for the companies whose contracts are at play. This means – at least in theory – that companies can do away with both contract provisions for sexual harassment and discrimination matters.
In December, for instance, Microsoft announced that it would no longer require individuals to settle sexual harassment cases privately, becoming one of the first major companies to eliminate forced arbitration clauses. The American tech giant took its commitment a step further by publicly backing new federal legislation introduced by a group of bipartisan lawmakers, including Democratic Senator Kirsten Gillibrand and Republican Senator Lindsey Graham, that aims to legally bar companies from using forced arbitration for sexual harassment allegations.
More recently, Uber announced that it would also do away with the enforcement of arbitration clauses for sexual harassment claims, but still maintains its class action waiver provision for harassment-related allegations.
As for exactly how common arbitration clauses and class action waivers are in fashion, it is difficult to pin-point. However, it is absolutely worth noting that no shortage of industry cases – ranging from those filed against Nasty Gal for gender and pregnancy discrimination and Forever 21 for transgender discrimination to American Apparel and its founder Dov Charney for sexual harassment, just to name a few – have been dealt with by way of mandatory arbitration. These cases are likely representative of a much larger number pool of cases and a truly expansive number of fashion brands, publications, and other industry companies, such as PR firms and model management companies, that make use of such provisions.