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Microsoft Ends Forced Arbitration Agreements in Sexual Harassment Claims

On December 19, 2017, Microsoft announced that it was eliminating forced arbitration agreements for employees making sexual harassment claims and voiced its support for a recently proposed bill—the Ending Forced Arbitration of Sexual Harassment Act of 2017—that would make such agreements unlawful in many workplaces. The announcement makes Microsoft one of the first major corporations to eradicate mandatory arbitration agreements, which are at present nearly ubiquitous in the landscape of employment discrimination and harassment claims.

Earlier this year, we reported on the increasing prevalence of mandatory employment arbitration agreements, which approximately 55 percent of U.S. workers are now subject to, according to a recent Economic Policy Institute report. On its face, an arbitration agreement simply requires an employee to handle future discrimination and harassment claims in a private forum, rather than in court, and many employees don’t think twice about signing such agreements in the stack of onboarding documents they receive from HR at a new job.

But there are a number of significant, often hidden disadvantages for employees signing such agreements. Arbitration forums show a statistical bias toward employers: Employees are less likely to win at arbitration than in court and, when they do prevail, often recover lower damages than they would at trial. Moreover, studies show that employers are more likely to win cases the more times they appear before a given arbitrator—meaning that repeat violators of discrimination laws are not only able to continue their unlawful practices without ever appearing in court but, over time, become increasingly likely to defeat employees who fight those practices. A 2011 Cornell study of nearly 4,000 employment arbitration cases found that employees bringing claims had a success rate of around 31 percent when the employer in question had defended only one case before a given arbitrator. When the company had had multiple cases before that arbitrator, however, the plaintiff success rate dropped by more than half.

In addition to this pro-employer bias, the private nature of arbitration deprives workers of the opportunity to tell their stories and pursue their claims in a public forum before a jury, contributing to broad silencing and isolation of those who have experienced discrimination. In its 2016 report “Advancing Opportunity: A Review of the Systemic Program of the U.S. Equal Employment Opportunity Commission,” the Equal Employment Opportunity Commission found that forced arbitration “can prevent employees from learning about similar concerns shared by others in their workplace” and thereby play a role in perpetuating systemic discrimination.

This suppression and isolation is intensified when combined with the prevalence of out-of-court settlements in employment discrimination cases—which are almost always effectuated with nondisclosure agreements whose terms swear employees to silence—and the class action waivers that nearly one third of employers who mandate arbitration require employees to sign along with arbitration agreements. By taking away employees’ rights to litigate their claims in court, discuss the discrimination and harassment they have suffered in the workplace with others, or band together to assert their rights in a class action, employers eliminate much of the already limited recourse workers have for discrimination in the workplace.

Taken together, these factors have dissuaded many workers from pursuing their claims or telling their stories, but, in recent months, employees have spoken out in unprecedented numbers about sexual harassment in the workplace and have brought to light long histories of sexual harassment in virtually every job sector, from politics to film and theatre to manufacturing. The media frenzy surrounding these sexual harassment allegations—and the corresponding outrage about corporate response or lack thereof—has prompted a number of well-known companies to take action, including Amazon, NPR, Vox, and Nickelodeon.

Microsoft’s announcement makes it one of the first companies—and certainly the largest and most influential to date—to make a significant change for employees looking to pursue sexual harassment claims. As one of the world’s largest software companies, Microsoft wields significant influence in the marketplace, and its unusual move to eliminate arbitration agreements is hopefully a sign of broader change. As more and more workers speak out about their experiences with sexual harassment—and being silenced once they report it—corporations must begin to realize that a company’s failure to adequately respond to reports of sexual harassment is both deeply damaging to its employees and bad for business.

A law like the Ending Forced Arbitration of Sexual Harassment Act—a federal bill which was recently proposed by a bipartisan group of politicians, including high-profile names from both sides of the aisle, like New York Democrat Senator Kirsten Gillibrand and South Carolina Republican Senator Lindsey Graham—would formalize these kinds of protections. Gillibrand said, in support of the bill, “Without the secrecy of mandatory arbitration agreements, serial predators will be less likely to continue climbing the corporate ladder and employees won’t be forced to stay quiet about the harassment they have faced at work, which is good for employees and good for business.”

If you have been subjected to discrimination or harassment in the workplace, contact The Harman Firm, LLP.

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