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What is the Effect of Arbitration Clauses on Sexual Harassment and Other Employment Discrimination C

The New York Times recently published an article about the company American Apparel and how its forced arbitration and confidentiality agreements with its employees prevented the company’s board of directors and investors from learning about all of the sexual harassment claim against the company’s founder.

Essentially, this company and others has been requiring that current and prospective employees sign agreements to submit any employment disputes (including discrimination and harassment claims) to an arbitrator or panel of arbitrators, rather than file lawsuits in court. Unlike lawsuits filed in state or federal courts, which are available for viewing by the public, arbitrations are private and the details of the claim are not available anywhere. For employers, arbitration can save costs, eliminate the threat of punitive damages, and limit public exposure of the company’s dirty laundry. For employees, there really is no advantage.

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