Page 73 - The Economist Asia January 2018

Business 57
The Economist January 27th 2018
Arbitration agreements in America court, says Mr Colvin. But comparing arbi-
Kept out of the courthouse tration and court cases is not easy: the
terms of arbitration can vary widely, mak-
inggeneralisingacross them difficult.
Another criticism of arbitration agree-
ments, voiced by Ms Carlson, the news an-
chor, is that they silence victims. Often the
proceedings have confidentiality clauses
attached that prevent the employee from
Bosses who behave badlyare being shielded bycontractual small print
speaking about the case, thereby protect-
MAGINE wanting to sue your employer, justify a suit in court. ing repeat offenders. Paula Brantner of
Ibecause you have been harassed or dis- Others argue that arbitration is ill- Workplace Fairness, an employee-rights
criminated against, only to find that your suited to employment disputes. In many charity, contends that, without the threat
access to the courts is blocked. It turns out cases, it and its terms are in effect imposed of litigation and the negative publicity it
you signed away your right to use the judi- on employees, says Imre Szalai of Loyola brings, companies have less of an incen-
cial system when you started the job: University in New Orleans. New recruits tive to root out bad behaviour.
somewhere, hidden in the documents that may not look at the small print, or think it In the wake of the #MeToo movement,
came with your employment contract, will ever apply to them. “It is a fantasy of legislators are now taking aim at arbitra-
was a clause obliging you to resolve future consent, rather than the real thing,” says tion in harassment cases. A draft bill ban-
disputesthrough private arbitration, rather Katherine Stone at University of Califor- ning mandatory arbitration in such cases
than in court. nia, Los Angeles. was introduced in Congress last month.
An increasingnumberofAmerican em- Another concern is that the process of Supporters are cheered by the fact that the
ployees find themselves in this situation. arbitration favours employers. They often bill’s sponsors span both sides of the aisle.
Overhalfofnon-unionised employees are pickthe firm ofarbitrators. And individual But lobbyists warn that its broad wording
covered by arbitration requirements, esti- arbitrators are more likely to encounter the could be construed as banning arbitration
mates Alexander Colvin of Cornell Uni- employer than the employee in future in all workplace disputes. Previous such
versity, based on a survey in 2017 of 627 cases. Both featuresmaylead the arbitrator proposals have nevergot offthe ground.
private-sector workplaces. Such agree- to be unconsciously biased towards the Indeed, arbitration’s scope could wid-
ments have come under greater scrutiny employer, says Victoria Pynchon, a former en further. One open question is whether
afterthe wave ofworkplace sexual-harass- arbitrator with the American Arbitration firms can ban employees who are subject
ment revelations last year. Gretchen Carl- Association (AAA), who now runs She Ne- to mandatory-arbitration clauses from fil-
son, a formernewsanchorforFox, a broad- gotiates, a trainingand consultingfirm. ing class-action suits. The US Chamber of
caster, has called arbitration “the In some cases, biases are explicit. Ms Commerce says such a ban is essential to
harasser’s best friend”. Prevented by an ar- Pynchon was warned at the start ofher ca- avoid needless claims. The Supreme Court
bitration clause from suing the network, reer that awarding punitive damages is due to rule before June on whether that
Ms Carlson sued her boss and alleged ha- against employers could mean she would would violate labourrights.
rasser, RogerAiles, instead. never arbitrate another case. Large arbitra- Such a prohibition hasalreadybeen ap-
Arbitration was originally designed for tion groups, such as the AAA, do have proved by Congress in the case of arbitra-
commercial disputes. It has also become a codesofconductthatprohibitsuch partial- tion in consumer contracts (reversing a de-
common feature of consumer services: ity. But Mr Szalai, of Loyola University, cision by the Consumer Financial
Airbnb’s terms of use include them, as do questions whether these counteract im- Protection Bureau). Firms may even start
mobile-phone contracts. But such clauses plicit biases. slipping arbitration clauses into IPO docu-
increasingly show up in employment con- Unsurprisingly, perhaps, recent studies ments, after Michael Piwowar of the Secu-
tracts, too. Back in the early 1990s, only suggest that outcomes and payouts in arbi- rities and Exchange Commission wel-
around 2% of non-unionised workplaces tration are, on average, significantly less comed the idea in a speech last year. The
used arbitration for employment disputes, generousto employeesthan those made in courtrooms may yet get emptier. 7
says Mr Colvin. A number of Supreme
Court rulings since then have encouraged
its broaderadoption.
The main advantage of arbitration,
compared with litigating in court, is speed:
adecision isreached, on average, a year be-
fore one is made in court. Instead of com-
plicated legal procedures, the parties in-
volved call in a neutral third person, often
an expertin the industry. The arbitrator lis-
tens to the evidence and makes a decision,
which is bindingin most cases.
The popularityofarbitration isa sign of
how very costly and technical the courts
have become, says Andrew Pincus, a
partner at Mayer Brown, a law firm, who
advises companies on such procedures.
Signing up to arbitration in advance, he ar-
gues, does away with jockeying for legal
advantage over where the case is best
heard, which almost always keeps the par-
ties from settling. And it allows employees
to make claims that would be too small to