President Obama Clears Workers’ Path to the Courthouse

On Behalf of | August 6, 2014 | Overtime Law, Wage & Hour

Thanks to an executive order signed by President Obama last week, employees who have suffered discrimination, harassment or sexual assault at work may have an easier time getting their day in court. Signed on July 31, the “Fair Pay and Safe Workplaces Executive Order” forbids companies who contract with the federal government from requiring their employees to sign arbitration agreements – something that would force employees to have disputes with their employer be decided by a private arbitrator instead of in court.

It may seem surprising that the President’s Order is even necessary. But without the President’s Order, many workers have been barred from seeking courthouse justice because their employers require them to sign arbitration agreements, often as a mandatory condition of employment. Under these agreements, workers cannot sue their employers in court, but must instead resolve their disputes in a secret proceeding overseen by a private arbitrator who is oftentimes paid by the employer. In 2010, 27 percent of U.S. employers reported that they required forced arbitration of employment disputes—covering over 36 million employees, or one-third of the non-union workforce, according to the National Lawyers Employment Association (“NELA”).

Although arbitration might seem like a dry procedural issue buried in the back of your employee handbook, it can a very real — and negative — effect on a potential case you might bring against your employer.  These disadvantages include increased costs and special rules that typically require the proceedings be kept confidential, limiting the employer’s risk of public exposure. Moreover, arbitrations typically have different procedural rules than a court would impose, including more limited discovery. This makes it harder to prove to prove your case. Even worse, many arbitrators do not allow employees to bring a class action in arbitration, which prevents workers from banding together against a Company.

Against this bleak backdrop, President Obama’s Executive Order stands as the first major victory against forced arbitration in recent memory.  The new ban on mandatory arbitration specifically applies to disputes brought under the anti-discrimination provisions of the Civil Rights Act of 1964 (which includes Title VII), as well as to accusations of sexual assault and harassment. It applies to government contractors with more than $500,000 in annual business with the federal government—a group that encompasses roughly 24,000 businesses employing more than 28 million workers, according to the White House.

Although Democrats have attempted to introduce legislation banning pre-dispute arbitration agreements in the employment context – most recently, Senator Al Franken (D-MN) and Representative Hank Johnson (D-GA)  introduced the Arbitration Fairness Act (AFA) of 2013, S. 878/H.R. 1844 — the bills have gotten no traction in a politically-divided Congress. Even as worker’s advocates have praised the Order as a major victory, its adoption may not be completely smooth sailing. The Order is likely to provide more fodder for House Republicans, who voted last week to sue the President for allegedly exceeding his presidential powers.  Moreover, employers and the defense firms that represent them are certainly going to argue that the Order should have limited application – for example, that it should only apply to business units that directly deal with the federal government, as opposed to all departments of a company.

Only time will tell if President Obama’s Order ignites a larger movement to banish courthouse lock-outs from employment contracts. As an attorney who represents employees, I have seen the real impact of forced arbitration on my clients, and I hope that it does. Across contexts, systems of private justice silence victims of wrongdoing and prevent the public exposure and discourse that leads to accountability and change.