WSJ- Sexual Harassment Claims Fizzle Due To Arbitration Agreements

Her plans to pursue the claim unraveled when her attorney discovered after filing suit that Ms. Anderson, like other Waffle House workers, had signed an agreement mandating she settle any employment-related claims through arbitration instead of civil court.

Her attorney advised her that it wasn’t worth taking it to arbitration. Without a lawyer, she dropped it. “I knew I couldn’t fight it so I just let it go,” said Ms. Anderson, now 42 years old and living unemployed in Mississippi. “It was a humiliating situation. I felt like I was nobody and didn’t have a chance.”

More companies are adopting the mandatory-arbitration clauses, and many employees are walking away from harassment, wrongful-termination and discrimination claims rather than taking them to a privately run tribunal, according to experts and new research.

The percentage of nonunion, private-sector employees covered by the mandatory-arbitration clauses has more than doubled since the early 2000s, according to a 2017 study by a Cornell University professor and sponsored by the Economic Policy Institute, a left-leaning think tank in Washington, D.C.

In many cases, workers drop the claims because they can’t get lawyers to take their cases. Plaintiffs’ lawyers say they are reluctant to represent arbitration clients on contingency fees because potential settlement and award payouts are generally lower than in court.

Ms. Anderson’s former attorney, Glenn McGovern of Metairie, La., said plaintiffs’ employment lawyers generally avoid arbitration “like a plague.” Kansas City plaintiffs’ attorney Dennis E. Egan of Popham Law Firm, P.C., who specializes in discrimination lawsuits, has a rule against representing arbitration clients. When they call, “I say, I’m sorry, arbitration is stacked against you,” he said.

Before Ms. Anderson’s case was dismissed in court in 2013, Waffle House had pushed back on her allegations, disputing even that the man she accused was her supervisor, according to court records.

“This is a six-year-old matter,” a spokesman said last week in a statement. “Since there was never any effort by Ms. Anderson to pursue arbitration, we consider this matter closed.”

In an atmosphere of rising awareness of sexual harassment stemming from the #MeToo movement, an estimated tens of millions of American employees work for companies that require disputes with their employers be adjudicated through arbitration, according to the study by the Cornell professor. The employees include a range of occupations—from waitresses to brewery workers to financial executives.

Arbitration involves trial-like hearings, often conducted by former judges or lawyers. Employers typically assume the costs of the arbitration service if it is mandated, but both parties have a say in deciding who hears the case, drawing names from a roster. Arbitrators usually don’t follow federal rules of civil procedure and, compared with courts, impose tighter limits on pretrial discovery. Arbitration cases are generally confidential and harder to appeal.

The business community says arbitration is a cheaper, faster and simpler way to adjudicate claims. But critics say the system is secretive and unfair to workers. Some lawmakers in Congress are currently pushing to restrict mandatory arbitration in cases of sexual harassment.

Many defense lawyers say the push to arbitration has led to an appropriate culling of weaker claims. Kenneth Willner, an employment lawyer at Paul Hastings LLP, said arbitration offers “more consistent decision-making that’s more attuned to the law” as compared with jury trials, where verdicts and awards are more unpredictable.

Others believe arbitration is keeping large numbers of worthy claims from being heard.

In a new draft paper titled, “The Black Hole of Mandatory Arbitration,” New York University labor and employment law professor Cynthia Estlund concluded that the great bulk of employment disputes subject to mandatory arbitration agreements “simply evaporate before they are even filed.”

It isn’t clear how many sexual-harassment claims are heard in arbitration but the evidence suggests it is a relatively small number. The American Arbitration Association says it received about 100 sexual-harassment claims in 2016, representing about 3.5% of the group’s employment cases, and that the numbers haven’t fluctuated much year-to-year. The group is the largest arbitration forum in the country and administers roughly half of all mandatory employment arbitration cases, according to researchers.

The next largest arbitration forum in the country, called JAMS, declined to say how many harassment cases it receives, saying it doesn’t keep track.

The number of employees alleging sexual harassment in the U.S. isn’t known. The federal Equal Employment Opportunity Commission receives close to 7,000 complaints a year about sexual harassment from employees, who are required to notify the agency about discrimination allegations before bringing a federal a lawsuit

Pennsylvania State University labor-relations professor Mark Gough says for many lawyers, the aversion toward arbitration comes from a simple financial calculation about potential payouts. Plaintiffs’ lawyers he surveyed in a new study told him that settlements on average are $12,000 less for clients covered by the clauses.

Some believe the focus of any changes to the current system should be finding ways to ensure that claims with merit are heard.

“That screening impact is much more important than what happens to the minuscule number of claims that are taken to arbitration,” said Jean Sternlight, a University of Nevada law professor who specializes in dispute resolution