July 31, 2014

Public Citizen Commends Obama for Executive Order Restoring the Legal Rights of Employees of Federal Contractors

Statement of Christine Hines, Consumer and Civil Justice Counsel, Public Citizen

Note: Today, President Barack Obama signed an executive order that will require all federal contractors to stop forcing their employees to arbitrate discrimination, sexual harassment and sexual assault claims in order to do business with the U.S. government.

The executive order signed today not only provides critical benefits to federal contractor employees but also is an important acknowledgment by the president that access to justice is a fundamental American right that should not be discarded in the fine print of contracts.

The president’s move is modeled after an established Department of Defense (DoD) rule for defense contractors, which became law in 2009 as an amendment to a DoD funding bill introduced by U.S. Sen. Al Franken (D-Minn.). It prohibits forced arbitration for certain civil rights, sexual harassment and sexual assault claims.

Many federal contractors and other employers tuck in the fine print of contracts language that requires employees to surrender their right to sue the companies as a condition of employment. Instead of being able to go to court to seek remedies for harm, workers are forced to resolve disputes with their employers in secret, private arbitration proceedings that favor employers and deprive their employees of a fair hearing. The result is that many acts of employer misconduct, such as discrimination or other violations of federal and state labor laws, are covered up and employees’ claims go unheard.

The only drawback is that the executive order is narrowly tailored. Federal contractor employees who are subject to forced arbitration may still be unable to seek remedies in court for other employment violations such as unfair wages.

The use of forced arbitration is widespread and goes far beyond the workplace to harm consumers in many different sectors. Because of forced arbitration clauses buried in the terms of service for cell phones, credit cards, nursing home enrollment, and other products and services, consumers are unable to enforce many federal and state laws in court.

In addition to the executive order, Congress can and should restore consumers’ and employees’ right to seek accountability for harm caused by corporate misconduct by passing the Arbitration Fairness Act (AFA), introduced by Franken and Rep. Hank Johnson (D-Ga.). The AFA would require contracts to arbitrate employment, consumer, antitrust or civil rights disputes to be made after a dispute has arisen, ensuring that arbitration or other methods to resolve disputes, including the court system, are truly voluntary for all parties.

###