Buoyed by the #MeToo movement, California lawmakers are mounting a new push to prevent businesses from forcing workers into closed-door arbitration over sexual harassment, wage theft, discrimination and other complaints.
A bill authored by Assembly member Lorena Gonzalez Fletcher (D-San Diego), AB 3080, would affect 67 percent of private California employers–those who require their nonunion workers to sign agreements waiving their rights to file a lawsuit or to complain to state or federal agencies in the event of a dispute.
“In forced arbitration, settlements often require the victim to refrain from discussing the case publicly,” Gonzalez Fletcher said.
“In a workplace with a culture of sexual harassment, these arbitration agreements are particularly toxic, enabling the abusive behavior to continue unchecked,” she added.
The bill would prohibit employers from making new hires sign the waivers as a condition of getting the job, continuing in the job, or receiving an employment-related benefit, such as a bonus. Employers also would be barred from retaliating against any employee who declines to sign such an agreement.
The debate over mandatory arbitration, and the non-disclosure agreements they often include, has exploded nationally in recent months. Victims of sexual harassment and discrimination from Hollywood to Silicon Valley to Wall Street complain they are being silenced by paperwork they were made to sign as a condition of employment.
Under arbitration clauses, workers are referred to the employer’s dispute resolution company, which offers a list of arbitrators from which to choose. The arbitrators, often attorneys or retired judges, make legally binding decisions in private, away from any media scrutiny.
In 2015, Gov. Jerry Brown vetoed a similar anti-arbitration bill after intense lobbying by the California Chamber of Commerce and some 40 trade groups representing homebuilders, restaurants, hotels, retailers and other industries.
Brown acknowledged at the time “there is significant debate about whether arbitration is less fair to employees.” However, he wrote that courts have protected workers by requiring arbitrators to be neutral in workforce disputes.
He also cited court mandates for “adequate [legal] discovery, no limitation on damages or remedies, a written decision that permits some judicial review, and limitations on the costs of arbitration.”
At an Assembly Labor and Employment Committee hearing last week, the Chamber’s Jennifer Barrera said arbitration proceedings are “a more open forum” than courts because information on the cases are posted on arbitration company websites.
Bipartisan legislation pending in Congress to address arbitration in sexual harassment cases is “where the discussion is,” she added. “It is a federal issue.”
Binding arbitration is used not just in employment, but also in a broad range of transactions by businesses such as credit card companies and even by doctors’ offices. The practice accelerated after 2011 when the U.S. Supreme Court decided that AT&T customers had given up their right to sue in the fine print of their service contract.
Barrera said the Gonzalez Fletcher legislation would “probably be preempted” by federal arbitration law.
However, Steve Smith, a spokesman for the California Labor Federation, a chief sponsor of AB 3080, said, “We’re confident these provisions are well within the state’s purview without running afoul of federal law.
“The problem is growing exponentially. We need to put a lid on it or all the work California has done to protect workers is at risk.”
The bill passed the labor committee last week on a 5-2 party line vote: Democrats voted in favor and Republicans opposed it.
It is scheduled to be heard in the Judiciary Committee Tuesday and could reach the Assembly floor by the end of the month.
Gonzalez Fletcher has asked Speaker Anthony Rendon (D-Lakewood) to issue a subpoena to allow Tara Zoumer, who gained notoriety in 2016 for suing WeWork for overtime pay, to testify without legal consequences, despite having signed a non-disclosure agreement in an arbitration proceeding. The San Diego Democrat also has enlisted Susan Fowler, a former Uber engineer whose blog post about sexual harassment at the ride-sharing company became a cause célèbre, contributing to the downfall of chief executive Travis Kalanick.
Fowler was unable to sue Uber because she had signed the company’s arbitration agreement.
“On my first day, I was sexually harassed and retaliated against for reporting it,” Fowler said at a press conference last week. “As a condition of employment, Uber made us sign away our constitutional rights.
“Ending forced arbitration is the single most important thing the legislature can do to prevent harassment and discrimination in the workplace.”
At the committee hearing, Roberto Ramirez, who worked 18 years as a cook and cashier for a Los Angeles Carl’s Jr. outlet, wept as he described what he called “the humiliation” of a manager stealing a week’s wages from him and regularly denying him rest breaks and sick leave.
“My manager told me there was nothing I could do because of company policies,” he said. “I was told I had no rights.”
A spokeswoman for CKE Restaurants, Carl’s Jr.’s corporate parent, said the company “does its best to be a fair place to work” and does not require arbitration contracts. However it does not restrict the right of its franchises to do so, she added.
A recent study by the Economic Policy Institute, a Washington, D.C. think tank, found that mandatory arbitration is most common in low-wage workplaces and in industries with a high number of women workers.
EPI found that last year 56 percent of private-sector nonunion workers in the U.S. — about 60 million people — were subject to mandatory arbitration in employment contracts. The agreements bar access to the courts for all types of legal claims, including those based on Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Fair Labor Standards Act.
“The practice is especially widespread in California,” said EPI attorney Marni von Wilpert. “This means that, when a worker is paid less than she is owed, is fired for being pregnant, or is underpaid because of her race, she cannot have her claim heard in a court of law. Instead, she is locked into a private arbitration process that favors the employer.”
Gonzalez Fletcher’s bill, unlike the 2015 version, does not invalidate current arbitration agreements that workers were obliged to sign.
“Arbitration is a highly effective dispute resolution method when both parties chose it freely,” she said. “It is far less successful when the more powerful party forces the other to accept the terms.”
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