Mandatory Arbitration and NDAs: Good or Bad for Employees? #KindaBoth
In the world of workforce compliance, sometimes a suggestion or piece of advice comes along that doesn’t fit into neat categories of right and wrong. The same approach that works wonders for one organization may sensationally backfire at another. In other words, some compliance ideas aren’t quite good or bad, but #KindaBoth.
Two controversial legal tools—non-disclosure and mandatory arbitration agreements—may fit this description.
If you’ve followed along with news about workplace sexual harassment allegations over the past couple years (and if you’re reading this blog, you really should be caught up by now), you’re probably familiar with arbitration agreements, NDAs, and the debate surrounding their use. But just in case, here’s what you need to know:
Mandatory arbitration agreements bind employees who make claims about harassment or other forms of discrimination to resolve their disputes with their employers outside of courts.
In the event of a settlement, NDAs prohibit parties from publicizing information related to the case, including allegations of harassment, discrimination, and/or other employment details.
Both contracts are common legal tools, and both have come under intense scrutiny in the wake of the #MeToo movement. Many activists believe NDAs and arbitration agreements perpetuate cycles of harassment and discrimination by limiting employees’ ability to find out about the experiences of their co-workers and colleagues. As Hiba Hafiz wrote in The Atlantic, for instance, confidentiality agreements can silence victims of workplace sexual assault and even “violate federal labor law if put to use.” The tide already appears to be turning: several states—including California and New York—have banned employers from using such contracts.
Not everyone agrees that eliminating NDAs and mandatory arbitration agreements helps the situation, however. Last June, attorney Kathleen M. McKenna of Proskauer Rose LLP testified before the Equal Employment Opportunity Commission to “request for thoughtfulness and care in addressing the problem” and remind the EEOC that “bad facts can make bad law.”
“After the launch of the #MeToo movement,” she said, “there was a rise in voices asserting that mandatory arbitration of harassment claims and resolution of such claims with non-disclosure agreements are acts of secrecy—with sinister connotations—that facilitate harassers insulating themselves from the consequences of their actions. Respectfully, these conclusions and their underlying assumptions, generally speaking, are incorrect.”
Specifically, McKenna argued that arbitration can sometimes be a better option than litigation for resolution of claims, and that NDAs provide all parties with a “definitive end to the dispute.” For one, she said, courts are already “significantly overburdened,” leading to significant delays for costs for both parties in a dispute. Second, there are perhaps some things courts can’t and shouldn’t rule on:
“It is important to remember that we are talking about resolution of disputes. There are almost always significant fact disputes in sexual harassment cases. It is also important to keep in mind that all sexual conduct in the workplace is not per se unlawful. Rather, the law makes unlawful unwelcome sexual conduct. Further under federal law, and the law in many other jurisdictions, the conduct at issue must be ‘severe or pervasive’ in order to impose liability on employers. Human relations are, as they say, ‘complicated.’ The question of whether sexual comments or conduct were in fact welcomed is very often at the center of sexual harassment disputes. Often a finder of fact cannot discern whether conduct is sufficiently severe or pervasive without a full hearing on the merits.
Those that are now critical of arbitration as a forum to address the merits now label as a ‘secret’ forum that which we previously and appropriately called a confidential process. Exploring the continuums of sexual conduct in the workplace presents the opportunity for discomfort and worse for both the accuser and the accused. Corporations and partnerships that face vicarious liability for the acts of their employees run the risk of public reputational damage for conduct that they almost invariably prohibit and work to guard against. The truth of the matter is that there are clear personal and professional motivations to air such disputes in a confidential legal process.”
Read McKenna’s full testimony here.
Who do you agree with: the jurisdictions that have banned confidentiality agreements, or labor and employment attorneys like McKenna? #KindaBoth?
Regardless of where your beliefs lie, be sure to familiarize yourself with your state’s laws—and speak with your lawyer—before including an arbitration or non-disclosure clause in your next contract. Because while legal theory may be debatable, the impact of regulatory enforcement sure isn’t.
