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Much-Needed Fair Pay Act Won’t Fully Help Some Employees

Jan. 23, 2009 

Much-Needed Fair Pay Act Won’t Fully Help Some Employees

Many Companies Force Workers to Forfeit Their Right to File Claims in Court

WASHINGTON, D.C. – Victims of gender discrimination in the workplace won a major victory in the U.S. Senate late Thursday with the passage of the Lilly Ledbetter Fair Pay Act, but some women may not be fully protected under the measure, according to Public Citizen.

That’s because many employees have been forced to sign binding mandatory arbitration agreements, which means they have forfeited their rights to take job discrimination claims to court, said David Arkush, director of Public Citizen’s Congress Watch division. Fifteen to 20 percent of employees – roughly 30 million workers – are covered by binding mandatory arbitration agreements forced on them by their employers.

These contract provisions require individuals to submit all disputes to private “company courts” chosen by the employer instead of litigating in public courts. There are severe flaws in mandatory arbitration. Foremost, the arbitration company is chosen by the employer and therefore has an incentive to favor that side. Forced arbitrations are also secretive, expensive to consumers and workers,    and provide virtually no meaningful appeal – even for decisions that are grossly unfair or flatly mistaken about basic facts.

Arbitrators are not required to follow federal law, and they have an inherent financial incentive to favor employers who choose them,” Arkush said. “An arbitrator’s decision is virtually unreviewable in real courts, even if the arbitrator has blatantly disregarded federal law. That means the roughly 30 million American employees subject to forced arbitration contracts may never benefit from laws like the Ledbetter Fair Pay Act.”

While Arkush urged President Obama to sign the Ledbetter Act, he said that Congress also should pass the Arbitration Fairness Act, which garnered 103 bipartisan co-sponsors in the House of Representatives in the last Congress. The act prohibits companies from imposing binding mandatory arbitration in employment and consumer contracts, and for claims brought under civil rights statutes like the one that protected Lilly Ledbetter, the Civil Rights Act of 1964. The Ledbetter bill overturns a U.S. Supreme Court ruling that unfairly restricted the timeframe in which federal wage discrimination complaints could be filed, holding that Ledbetter’s right to bring a discrimination claim expired even before she had learned that her employer had discriminated against her.

More congressional action is needed because of U.S. Supreme Court rulings that have held that discrimination claims under the Civil Rights Act can be sent to arbitration, said Graham Steele, a Public Citizen civil justice lobbyist.

“There is something inherently unjust about requiring employees to give up their right to a fair hearing in court as a condition of taking or keeping a job,” Steele said. “Congress is making a clear statement that victims of employment discrimination are entitled to the full protection of the Civil Rights Act. But to ensure that the law applies to everyone, Congress must put a stop to forced arbitration.”