The Brave New World of Employment Agreements: Ending Forced Arbitration

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Rep. Cheri Bustos, Kristen Prinz, Scott D'Angelo, Christie Hefner.

Rep. Cheri Bustos, Kristen Prinz, Scott D'Angelo, Christie Hefner.

On October 11, 2022, Kristen Prinz participated in a panel discussion moderated by Christie Hefner on the recently enacted “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” (“EFAA”). Also on the panel were Congresswoman Cheri Bustos (D-Ill. 17), the legislator who sponsored the bill in the House of Representatives, and Scott D’Angelo, chief legal officer and corporate secretary for the CTS Corporation. The purpose of the panel was to raise awareness about the new law, which expands legal protections for millions of Americans, particularly anyone who ever signed a contract or agreed to any service’s terms and conditions.

What Changed?

The EFAA (Pub. L. No. 117-90, 136 Stat. 26), which President Biden signed into law on March 3, 2022, amends the Federal Arbitration Act of 1925, to prohibit predispute arbitration clauses in cases involving sexual harassment and sexual assault. Specifically, “No predispute arbitration agreement . . . shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.”

Most contracts and service agreements contain provisions, called “predispute arbitration clauses,” that require the signer to waive their constitutional right to bring a legal claim in court and force them to submit it to arbitration instead. These predispute arbitration clauses are buried in the non-negotiable “fine print” of contracts and agreements. Under the EFAA, if the signer’s legal claim involves sexual harassment or sexual assault, that predispute arbitration clause is void. Because the law includes claims that “relate to” sexual assault or sexual harassment, the EFAA could apply to related complaints such as wrongful termination, misclassification, or intentional infliction of emotional distress.

Why is Forced Arbitration Problematic?

Forced arbitration clauses are problematic for survivors because arbitration is private, often requires the survivor to bear their own costs and attorneys’ fees, and often the recovery on the claim is less than what a jury would award. Companies prefer arbitration because they can select the arbitrator, who tends to be friendly to the companies, and it is secretive. Forced arbitration clauses are problematic to society, because without publicity, companies that allow cultures of sexual harassment to flourish evade accountability and have no incentive to change.

Representative Bustos described how she was inspired to take up this cause by an article in the Washington Post about how 69,000 women employed by Sterling Inc., the parent company of Kay Jewelers and Jared the Galleria of Jewelry, were forced to bring their claims of sexual harassment, sex discrimination, and sexual assault to arbitration. Those claims included women who were raped by managers, who were subjected to comments like “I want to lick you from head to toe,” and who were denied even the opportunity to interview for positions that later went to men. Forced arbitration denied these women justice and silenced them.

Laura Lefkow-Hynes and Kristen PrinzLaura Lefkow-Hynes and Kristen Prinz.

A Rare Bipartisan Achievement

The EFAA passed the House of Representatives on a vote of 335 to 97, and it passed the Senate on a voice vote. Representative Bustos shared that strong bipartisan support was only possible with the old-fashioned “shoe-leather work” of “compromise, sitting down with people you don’t like, and listening.” She said her ability to compartmentalize and refusal to badmouth her colleagues allowed her to partner with legislators whose views are very different from hers. Ms. Hefner emphasized, “Compromise moves us forward,” and urged the audience to vet their political candidates on their ability to reach across the aisle and compromise.

Although a similar bill failed to gain traction in 2017, the bill’s proponents rewrote the bill from amending the Civil Rights Act of 1964 to amending the Federal Arbitration Act. They also expanded the scope from forced arbitration clauses in employment contexts to all forced arbitration clauses governed by federal law. This means that customers of ride-share apps who suffered sexual assault from drivers did not have to go to arbitration because they had clicked “I agree to the terms and conditions.” It also means that senior citizens who were sexually abused by staff at nursing homes could choose the forum in which they seek redress.

Representative Bustos and Senator Kristen Gillibrand (D-N.Y.) introduced the bill in July 2021. The legislation was also supported by staunch conservatives, including former Fox News anchor Gretchen Carlson and Senator Lindsey Graham (R-S.C.). Representative Bustos said it was a game changer when Sen. Graham told the Chamber of Commerce that forced arbitration of sexual harassment claims was “bad for business.” Still, there was no political will among conservative legislators to take up the Forced Arbitration Injustice Repeal Act (“FAIR Act”), which would end all pre-dispute forced arbitration of claims brought against an employer or business. Representative Bustos shared that Rep. Hank Johnson (D-Ga. 4th), who has been working on the FAIR Act for years, gave her his blessing to advance the EFAA, even though it would detract from the FAIR Act. Representative Bustos candidly stated that the FAIR Act is the better legislation and its enactment is her goal.

A Win for Employers?

Ms. Hefner asked Mr. D’Angelo whether the EFAA was a triumph for employees over businesses. Mr. D’Angelo said ending forced arbitration is good for businesses, too. In his roles as general counsel, he was not just protecting the value of the company and shareholders, but working to create a company culture that does not tolerate sexual harassment. Once a sexual harassment claim arises, the company has already lost, regardless of whether the claim goes to arbitration or litigation, because of its impact on talent, executive leadership, and company resources. He advocated tackling company culture long before a claim arises.

Creating a Sexual Misconduct-Free Workplace

Ms. Hefner asked Ms. Prinz how companies can avoid sexual harassment and assault in the workplace. Ms. Prinz said that while there will always be individual bad actors, companies need to have consistent conversations and exemplify behaviors that create a culture of respect. “You are what you tolerate,” she said. Effective sexual harassment prevention cannot rely on a module employees must complete once a year, she cautioned. Mr. D’Angelo agreed that “rolling out a module once a year doesn’t work.” He suggested creating a culture of openness, mutual respect, and keeping an “ear to the ground.” Managers should dialogue with workers, and then talk upstream. Additionally, the messaging about sexual harassment must be tailored to the workers. Ms. Prinz added that you have to ask the right questions and try to get good information. That can include regular auditing of employees, so that employees who are not in an empowered position can speak up.

One of panelists commented that “culture eats strategy for breakfast,” meaning that without changing the mind-set of the team, any strategic plan to eradicate sexual harassment will fail. They recommended hiring an influencer to amplify the messages the company wants to communicate.

While historically companies could put their heads in the sand about bad behavior, that approach no longer works. Ms. Prinz spoke about the importance of acting as an “upstander” rather than a bystander when witnessing inappropriate conduct. While there is risk in speaking out, you can “call in” rather than “call out” people. Ms. Prinz recommended privately taking an individual aside and saying, “I’m sure this was not your intent, but I noticed this impact from your conduct.” Again, it takes a culture of openness, respect, and non-retaliation to enable those difficult conversations.

Ms. Hefner posed the question of whether there is ever an advantage to arbitration over litigation for individual claimants. Ms. Prinz said “the best litigators try to keep their clients out of court.” Arbitration can be faster, but it’s not always equitable. The EFAA provides choices.

Representative Bustos agreed that the lack of choice was a problem. She said the women who testified before the House Judiciary Committee about their experiences with forced arbitration were “as responsible as anyone” for the EFAA’s passage. They bravely shared how they were traumatized by sexual misconduct and then further traumatized by being silenced through forced arbitration. The EFAA allows survivors to choose the legal remedy that works best for them.

The event was hosted by the HRMAC Institute of the Executives Club of Chicago.