Saturday, April 28, 2018

Arbitration, shaming, and #metoo

The #MeToo movement has shone a spotlight not only on sexual harassment, but also on the NDAs and arbitration agreements that allow it to flourish undetected for many years – until, in some cases, it finally explodes into a full-grown corporate crisis.

Part of the explanation is that victims choose to enter into settlements rather than conduct lengthy, expensive, and potentially humiliating court battles – which is understandable and a problem for which there is no obvious immediate solution.

But the other part of the explanation is that women (and men, who are harassed at lower rates but still may be targeted) are frequently forced to sign agreements to arbitrate claims confidentially as a condition of employment or the use of various services, and the Supreme Court – with its muscular interpretation of the Federal Arbitration Act – has held that states are virtually powerless to regulate these agreements.  These agreements, it is well understood, are less about providing a venue for resolution of claims than about preventing claims at all, if for no other reason than most prohibit class actions.  So until Congress is willing to modify the FAA (which, well, I’m not going to hold my breath), the situation continues.

Or does it?

Public pressure has now caused some companies to abandon their arbitration agreements.  Microsoft ostentatiously announced it would no longer require them for sexual harassment claims.   There was a bit of a tempest when it was discovered that Munger Tolles had them in their employment agreements; after some angry Tweeting – including requests for school-wide boycotts by elite law students and faculty – many firms agreed to withdraw them.  

And now it seems the fight has moved to Uber.

Uber’s user agreement with its riders has long contained an arbitration clause, and of course, we all know of the horror stories where Uber drivers are accused of assaulting passengers, sexually or otherwise.  (Law Prof Nancy Leong reported a terrifying close call recently).   It’s been my habit in my basic business organizations class to show students Uber’s user agreement, including the part on safety – where, to paraphrase, Uber instructs riders they should tell a friend where they’re going and sit near the car door in case they have to run.  

Now, a group of women who allege they were sexually assaulted by Uber drivers have publicly released a letter to Uber’s board demanding that the board waive the arbitration clause.  Their attorney argues that the board cannot claim it genuinely cares about women’s rights while forcing these claims into confidential arbitration.

Uber's been plagued by a tsunami of poor press recently, all casting a shadow on its hopes for an IPO next year.  Given that, the women’s demand strikes me as a well-timed, savvy move. I don’t know if it can succeed – Uber may depend too heavily on keeping the misconduct of its drivers out of the spotlight – but on the other hand, as Twitter has demonstrated, there’s only so much silencing it can manage.  I look forward to seeing whether these straws are what finally break the back of widespread arbitration clauses in consumer contracts.

Ann Lipton | Permalink


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