Jurisprudence

No, Companies That Force Workers to Sign Away Their Right to Sue Are Not LGBTQ-Friendly

Revelers hold a Human Rights Campaign flag at the 36th Annual Capital Pride celebration in 2011.
Revelers hold a Human Rights Campaign flag at the 36th Annual Capital Pride celebration in 2011. Ted Eytan/Flickr

In 2018, a record-breaking 609 major employers received perfect scores from the nation’s largest and most visible LGBTQ rights organization for their inclusion of LGBTQ workers. The Human Rights Campaign lauded corporations like Walmart, CVS, Chevron, Verizon, and Amazon for internal policies prohibiting discrimination on the basis of sexual orientation and gender identity. These changes might be worth applauding—if those companies didn’t also force workers to sign away their right to sue if they experience the very discrimination and harassment that nondiscrimination policies seek to stamp out.

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The HRC will soon release its influential 2019 Corporate Equality Index, which scores companies on their corporate nondiscrimination policies for LGBTQ employees. But the index’s often-controversial criteria has a curious flaw: It doesn’t consider whether companies require employees to sign contracts with “forced arbitration clauses,” a legal loophole that waives workers’ right to sue over illegal treatment at work, like being denied overtime wages or getting fired for being queer or trans.

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Any employee who signs a forced arbitration agreement is legally obligated to settle her case before a private third-party arbitrator. This individual is often hand-picked and paid by the defending company to the tune of $1,000 to $2,000 a day. These arbitration “agreements” are anything but. Forced arbitration clauses are often buried deep in the legal fine print of employment contracts. Even if workers know that they’re waiving their rights, people who refuse to sign on the dotted line risk losing their jobs. As one company put it in a mass email to employees, “I understand that if I continue to work at Epic, I will be deemed to have accepted this Agreement.” Workers could either agree or quit.

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The Economic Policy Institute estimates that workers subject to mandatory arbitration win only 59 percent as often as they would in federal court and only 38 percent as often as in state court. Arbitration clauses frequently also require workers to waive their right to participate in class-action lawsuits—making the cost of hiring a lawyer to pursue a discrimination claim prohibitive for most LGBTQ people, nearly a quarter of whom live in poverty. Many workers, knowing they have little chance of succeeding in arbitration, choose never to bring claims at all. In other words, the field is tilted against workers before the game is even played.

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On top of all that, arbitration is a highly secretive process. Forced arbitration clauses are often accompanied by nondisclosure agreements. Decisions are very rarely published, and arbitration awards are virtually unreviewable by courts. The #MeToo movement has exposed how forced arbitration and nondisclosure agreements have silenced survivors of sexual harassment and assault and shielded companies with a long history of covering up harassment and discrimination from accountability. (See: Fox News). Forced arbitration has the same impacts on LGBTQ people. A queer secretary who’s denied a promotion because she doesn’t dress “femininely” enough, a nonbinary pharmacist who’s fired after they announce plans to transition, and a trans delivery driver whose health insurance plan illegally excludes gender-affirming care all have a right to sue—but if they’ve been forced to sign a mandatory arbitration agreement, neither the public nor the courts are likely ever to hear about it.

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Over the past 25 years, the Supreme Court has upheld these unfair agreements in a line of increasingly disturbing cases. To justify its decisions, the court cited the Federal Arbitration Act, a federal law that makes arbitration agreements enforceable by courts. When Congress passed the FAA in 1925, arbitration was seen as a less costly alternative to litigation for businesses with relatively equal bargaining power. It was never intended to be used in employment or consumer contracts. But as the Supreme Court shifted right, it expanded the FAA to cover a broad range of contracts between large companies and regular people.

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In a 2001 case involving a gay man harassed about his sexual orientation on the job, the court extended the FAA to cover virtually all workers. Saint Clair Adams was working as a computer salesman at Circuit City Stores when he overheard his colleagues making sexual remarks about a female customer. When Adams urged them to stop, one co-worker accused him of being gay. Adams stayed silent, but he soon found himself the target of a barrage of jokes about his rumored sexuality. Even his supervisor joined in. Adams filed suit against Circuit City in California, where state law protects workers against anti-gay discrimination and harassment on the job. But his employer sought to quash Adams’ suit, relying on a clause buried in Adams’ six-page job application agreeing to settle all claims “exclusively by final and binding arbitration.” Adams took his case all the way to the Supreme Court, which then read the FAA to include nearly all employment contracts.

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The decision caused a rapid expansion of arbitration, as employers realized they could effectively block their workers from bringing successful suits. In 1992, only 2 percent of nonunion employees in the private sector had signed arbitration agreements. By 2018, an estimated 56 percent had been forced to sign away their right to go to court, whether they know it or not. As LGBTQ workers have finally secured hard-won rights in state legislatures and federal courts, we’ve been steadily losing the power to enforce them. Consider Tim Chevalier, a transgender Google engineer who reports that he was fired after reporting harassment on the company’s internal messaging system. HRC gave Google a perfect 100 score on its Corporate Equality Index, in large part because the company prohibits precisely this kind of discrimination. But when Chevalier attempted to enforce those rights in state court, Google invoked a forced arbitration clause to keep him out of a fair forum.

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Can Google really be considered an LGBTQ-friendly firm if its trans employees can’t even avail themselves of their hard-won rights in a court of law? HRC’s Corporate Equality Index is supposed to help LGBTQ people figure out where they can work with dignity. To achieve that mission, future iterations should consider whether companies used forced arbitration to sweep discrimination under the rug.

Forced arbitration may be legal. But the Human Rights Campaign demands that companies do more than merely comply with the law by dinging companies that lack diversity councils or give philanthropic dollars to discriminatory organizations. LGBTQ advocates should know as well as anyone that justice may require more than the law does. Just years ago, few courts would recognize our federal right to be free from discrimination at work, and it may not be long before the Supreme Court reads us out of the Civil Rights Act again.

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LGBTQ workers need and deserve a federal LGBTQ nondiscrimination law and sweeping changes to the Federal Arbitration Act so that huge corporations can’t bully the little guy into signing away his rights. But we can’t simply wait for a White House less hostile to our rights. That’s why HRC’s Corporate Equality Index must stop giving top marks to companies using forced arbitration. LGBTQ-friendly policies on the books mean little if employees can’t meaningfully enforce their rights. Moving forward, employers who claim to be LGBTQ-friendly must drop their arbitration policies. And if they do not, it’s essential that HRC use its power to hold them to account.

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