Women-Friendly Workplace Campaign
Takes On Mandatory Arbitration

Capital City NOW protest outside NASDCapital City NOW activists, including Bridget Bolcik at left, protest outside a National Association of Securities Dealers meeting in Washington, D.C. Photo by Beth Corbin.

Companies across the nation are starting a dangerous trend. It threatens to set back civil rights gains more than 30 years.

If this movement is left unchecked, employees with discrimination claims in almost every industry could find themselves shut out of court. A standard requirement for Wall Street workers, mandatory arbitration, is fast becoming the preferred alternative for many employers.

“Mandatory arbitration is nothing more than a way for employers to evade the stricter civil rights law enacted after Anita Hill raised awareness about sexual harassment,” NOW President Patricia Ireland said, referring to the Civil Rights Act of 1991.

Because of NOW's insistence, that act for the first time gave women the right to a trial by jury and the right to receive damages in employment discrimination cases under Title VII of the 1964 Civil Rights Act. In addition to providing damages as a remedy for the employee, the 1991 act also allows limited punitive damages as a deterrent to employers.

NOW is concerned about the spread of arbitration. Increasing numbers of employees outside the securities industry are finding that they, too, must sign away their right to go to court in exchange for a job. Some companies requiring arbitration (and prohibiting litigation) include: Hooters, Renaissance Hotels, ITT Sheraton, Circuit City, Long John Silvers and J.C. Penney.

The types of arbitration policies are as diverse as the companies that implement them. Hooters’ policy arbitrarily caps punitive damages at one year’s compensation. Electronics retailer Circuit City has an arbitration system that is mandatory for employees but optional for the company. J.C. Penney implemented a mandatory arbitration policy without bothering to get the consent of its employees.

Experts claim that arbitration policies weighted in favor of employers are not unusual. According to one study reported in Newsweek, an estimated 10 percent of such policies refuse to allow employees to have their own attorneys at the arbitration, 15 percent give employers the sole right to choose the arbitrators and a third of the companies disallow discovery, which is the ability of a party to subpoena relevant documents and other evidence from the opposing party prior to the hearing.

While mandatory arbitration of employment disputes is a new practice in many companies, it has long been a fact of life for those employed in the securities industry, where stockbrokers and other employees are forced to agree to arbitration in order to work in the field.

According to Ireland, an arbitration overhaul is long overdue. “Thanks to mandatory arbitration, the securities industry is still a field dominated by white men,” Ireland said. “Women and people of color are forced to work in offices where managers have little fear of, or respect for, civil rights laws because they are essentially immune.”

Ireland’s comments came during her testimony at a National Association of Securities Dealers (NASD) hearing on the issue. The NASD, one of the bodies that regulates the securities industry, subsequently voted to remove the requirement that industry employees submit employment discrimination complaints to arbitration. The NASD’s decision clearly was influenced by public pressure generated in part by NOW’s Women-Friendly Workplace actions held across the country. The policy change will take effect one year after the Securities and Exchange Commission (SEC) approves the new policy. To date, the SEC has not taken action on the policy.

While this latest win is cause for celebration, NOW’s work is far from over. The NASD’s decision will not make mandatory arbitration on Wall Street go away. Securities firms — like financial giant Smith Barney — have their own personnel policies that require the arbitration of employment discrimination complaints. Ireland sent a letter to Jamie Dimon, Smith Barney’s CEO, asking him to prove that he and his company are committed to providing a workplace free of discrimination by changing Smith Barney’s current mandatory arbitration policy.

The only potential way for employees to maneuver around arbitration requirements is to file a class-action suit. When more than two dozen women who work or worked for Smith Barney in 11 different states found that they could not take their claims of sex discrimination and sexual harassment to court as individuals, they teamed up and formed a class to challenge the company in federal court.

But this strategy means finding enough people with similar complaints who are willing to participate; unfortunately, class-actions are often difficult to organize, expensive to litigate and disfavored by judges.

Through NOW’s Women-Friendly Workplace Campaign, NOW challenges employers to stop using mandatory arbitration and similar strategies to avoid complying with civil rights laws. Ireland urges activists to ask businesses in their areas to sign the Employers Pledge and to ask friends, neighbors and colleagues to sign the Consumers Pledge.

NOW is also pressing Congress to take action to stop mandatory arbitration. Sen. Russell Feingold, D-Wis., and Rep. Ed Markey, D-Mass., have introduced bills to ban the mandatory arbitration of employment discrimination claims. “Thus far, the courts have held that mandatory arbitration is legal, but we know it is not right. We need congressional action to remedy this injustice,” Ireland said.

For more information on the Women-Friendly Workplace Campaign or for copies of the Consumers Pledge, Employers Pledge and Ireland's NASD testimony, visit NOW’s Web page at www.now.org or call the NOW Action Center. 

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