Why Mandatory Arbitration Agreements Are Evil

Fox News has been in the spotlight recently after former anchor, Gretchen Carlson, filed a sexual harassment lawsuit against the head of the network. She alleges he repeatedly propositioned her and created a work environment where she felt harassed and uncomfortable.

Carlson’s suit has not only prompted other women at Fox News to come forward with their own harassment allegations, but it also started a conversation about just how pervasive sexual harassment continues to be in the workplace. However, there is an extra twist in this story that deserves just as much attention. Fox News and its lawyers are trying to force the dispute into arbitration according to the contract Carlson signed when she joined the network.

Arbitration is ostensibly an efficient, cost effective means of alternative dispute resolution. Truth be told, plenty of organizations include some form of arbitration agreement, similar to Fox’s, as a condition of employment. But mandatory arbitration agreements are of no benefit to employees in the event of a dispute. They deprive employees of their right to sue and have their case heard in court. In fact, these contractual handcuffs are downright evil.

Here’s why.

Employees jeopardize their jobs by refusing to sign

Including an arbitration agreement in a new hire’s pre-employment paperwork is one thing – at least he or she can determine whether or not accepting a job offer is a good idea. But many employers have only recently jumped aboard the arbitration bandwagon and are forcing their current employees to sign an agreement under threat of job loss. This particularly insidious tactic is made worse by the fact that some courts have ruled employees must submit to arbitration even if they merely acknowledged receipt of the company’s employee handbook, but did not sign the agreement. Even if an employee is wronged during the course of her employment and refuses to sign on the dotted line, she can still be compelled to arbitrate if the company’s lawyers prove arbitration language was part of the employee handbook she received.

The odds are grossly stacked in an employer’s favor

Disputes that are adjudicated through arbitration tend to result in a favorable outcome for the employer. This could be due to the fact that arbitrated disputes aren’t decided by juries, rather an arbitrator reviews the facts and makes a binding decision. Arbitrators are typically retired judges who won’t be as inclined to side with the wronged employee as would a jury of the employee’s peers. And arbitration is a very lucrative business – arbitrators can make several thousands of dollars in a day, depending on their case load – so it behooves them to side with employers who keep giving them business. The more employers who compel arbitration, the more cases arbitrators hear, the more money they make, the more they rule in favor of employers, the more employers compel arbitration…

Arbitration doesn’t punish an employer’s bad behavior

If an employee (or former employee) somehow beats the odds and succeeds in arbitration, the award is marginal at best and not likely to make a dent in the employer’s pocketbook. Moreover, since arbitration is a private method of dispute resolution, the public won’t hear the details of the case or its outcome. Businesses have historically been motivated by money, not necessarily by acting in an ethical manner. Large punitive damage awards and public trials are strong deterrents against corporate malfeasance. Losing a lot of money in a lawsuit is pretty compelling motivation not to mistreat employees. Arbitration all but removes a very tangible incentive for employers to treat their employees ethically.


Now, I’m not a lawyer and I won’t deny the fact that many organizations face frivolous lawsuits from disgruntled employees. I have a basic understanding of how contracts work and that, in the eyes of the law, “at will employment” and the concept of “duress” are pretty much mutually exclusive. Technically, no one is holding anyone hostage and forcing them to work for anybody else. Though their livelihoods are certainly being held hostage through forced arbitration.

I’m not arguing the legality of arbitration agreements per se. But I am arguing the morality of making them a mandatory condition of employment. Not only does it give employers an unfair advantage in negotiating with prospective employees, it gives them an unfair advantage in the event an employee is wronged during the course of employment (or in some cases, even afterward).

The most important point to take away here is this: When people are wronged by their employer, it has a real and lasting effect on them mentally, financially, professionally, emotionally, and even physically. Gretchen Carlson earned millions of dollars under her contract with Fox (though she is no less entitled to compensation for the harassment she allegedly suffered). She can write a book or retire or pursue a career in another form of media. But what about a junior staffer making $15 per hour? Even if the staffer wins, she has to pay for half the cost of the arbitrator. And then there’s the not-so-small task of finding another job, recovering from all of the anguish caused by this situation, paying her bills, supporting herself and her family. Even if she wins at arbitration, there’s nothing to stop her employer (or any future employer that mandates arbitration) from wronging her again.

Companies that force employees into arbitration agreements are basically saying: “If we wrong you (not that we’d ever admit it), then we’ll settle the matter in private, on our terms, using a method that’s guaranteed to work in our favor.”

Leaders who are courageous enough to eschew arbitration agreements are basically saying: “If we wrong you, then we’ll do everything in our power to make it right.”

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