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Sternlight – New Executive Order Blocks Mandatory Employment Arbitration

ADR Prof Blog by Andrea Schneider, Michael Moffitt, Sarah Cole,Art Hinshaw, Jill Gross and Cynthia Alkon.

FOI Jean Sternlight (UNLV) provides us with this guest post on the President’s recent actions on employment arbitration.

President Obama recently signed a new Fair Pay and Safe Workplaces Executive Order refusing to grant government contracts of over a million dollars to companies who mandate their employees arbitrate disputes involving discrimination, accusations of sexual assault, or harassment. This new order mirrors protections Congress already provided to employees of Defense Department contractors in 2011 in the so-called “Franken amendment.” The order also requires prospective federal contractors to disclose prior labor law violations and will instruct agencies not to do business with egregious violators.

While some will no doubt clamor that the President is overstepping his executive powers, this measure and more are well supported by the evidence of how mandatory arbitration impacts employees. Rather than providing greater access to justice for employees, as some have claimed, empirical studies show the following: (1) fewer than two thousand employees file arbitration claims each year, though millions are covered by mandatory arbitration clauses; (2) had these employees not been covered by mandatory arbitration thousands more could have filed individual suits or class actions in court (3) the imposition of mandatory arbitration makes it harder for employees to obtain legal representation; (4) companies are increasingly using mandatory arbitration to prevent employees from joining together in class actions, though class actions are essential to protect employees who fear retaliation, cannot feasibly file individual claims, or may not even be aware their rights have been violated (5) when employees do file claims in arbitration they do far worse than they would have done in court, whether one measures win rates or amounts of money won; (6) pro se employees do not flock to arbitration, and when they do file they don’t do well in arbitration.

In sum, the new executive order is at least a good start towards providing employees protection from mandatory arbitration. This order far from solves the problem of mandatory employment arbitration. It only covers employees of companies with large government contracts, and it only proscribes mandatory arbitration as to certain kinds of claims. The order will not for example protect employees who might seek to litigate Fair Labor Standards Act overtime claims in a class action in court. Nonetheless, in recognizing the significant problem posed by mandatory employment arbitration the new order may lead the way towards passage of the badly needed Arbitration Fairness Act. Fingers crossed!

                        author

Art Hinshaw

Art Hinshaw’s research and teaching interests lie in the field of alternative dispute resolution (ADR), primarily mediation and negotiation. His research bridges ADR theory and practice, and his teaching responsibilities include the Lodestar Mediation Clinic and Negotiation among other ADR courses. Professor Hinshaw is active in the ADR community having… MORE >

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