As the #MeToo movement sweeps through popular culture, unseating powerhouses in industries from entertainment to politics to academia, the financial industry has been remarkably quiet. On Wall Street, complaints of sexism, gender discrimination, and sexual harassment have simmered for years, but there have been no significant personalities removed from their positions or otherwise dethroned from power.
How has this powerful social movement remained barely noticeable in the white-collar world of high-stakes finance?
A Secret Weapon in an Ongoing War
From the trading floors to the corner offices, Wall Street is controlled largely by men. The atmosphere in many workplaces has been described as a "frat boy" environment, with many women reporting being regularly demeaned, touched inappropriately, discriminated against, propositioned, and sexually harassed. Despite many firms' efforts to increase awareness and prevention of sex-based harassment, the overall culture has been slow to change, and complaints about sexual harassment or assault are still made.
However, unlike in other industries, companies on Wall Street have been able to settle claims privately. In many cases, accused employees are permitted to leave quietly, which "can have the effect of satisfying neither the alleged victims, many of whom complain that departing executives can continue careers elsewhere with their reputations intact, nor the accused, who say the rapid-fire process doesn't allow for all the facts to come to light."
Mandatory Arbitration Bars More Public Litigation
One important reason for this is the inclusion of arbitration clauses in many workers' employment contracts. A Cornell University professor's 2017 study of 627 representative private-sector American businesses revealed that the percentage of nonunion, private-sector employees covered by mandatory-arbitration clauses has more than doubled since the early 2000s to over 55 percent (60.1 million workers).
These clauses bar employees from filing lawsuits in state or federal courts for all types of legal claims, including sexual harassment as well as discrimination, retaliation, and civil rights issues. Mandatory arbitration clauses require that any legal claims be resolved using an arbitration procedure established by the company and set forth in the agreement-which is usually required as a condition of employment. In October 2017, the Supreme Court ruled that these clauses also bar participation in a class action lawsuit against an employer.
Arbitration Clauses: Quick and Quiet
One advantage of arbitration for Wall Street firms is that it is faster and more private than using the legal system (which results in public records of legal action against alleged wrongdoers). The arbitration process involves one or more hearings, less formal than but similar to an in-court trial and often conducted by former judges or lawyers. Both parties have a say in deciding who hears the case, drawing names from a roster (often, one of each party's choosing and one that they must agree upon for a three-person panel or one agreed single arbitrator). Arbitrators usually don't follow federal or state rules of civil procedure (such as prohibiting evidence that is hearsay, for example) and, compared with courts, impose tighter limits on the scope of permitted pretrial discovery and investigation. As a result, resolution of cases is many times quicker (and generally less expensive) than cases in the court system.
This can work against the victims of harassment. The Wall Street Journal reports that many victims of sexual harassment, discrimination, or wrongful termination who are subject to arbitration agreements do not pursue action against their employers through the arbitration system. There are a variety of reasons for this, including difficulty finding an attorney and arbitration awards that are typically drastically lower than successful verdicts.
Arbitrations are generally confidential, and employees who choose to utilize the arbitration system are usually bound by a nondisclosure agreement regarding the terms of the settlement. This can allow an admitted wrongdoer to continue engaging in unlawful behavior without significant career repercussions like those faced by other industry titans. An unfavorable award is difficult to appeal, leaving employees with little recourse.
Hope from Silicon Valley
Prompted by a New York Times investigation (subscription req'd) into Google's lax handling of sexual harassment allegations and perpetrators, more than 20,000 workers employed by the internet giant worldwide walked off the job in protest on November 1, 2018. In response, Google's CEO announced that arbitration would be optional for individual claims. Facebook, Airbnb, and eBay followed suit, joining Microsoft, Lyft, and Uber, which made previous employment policy changes earlier in the year.
Granted, much of these tech company's shifts came as a result of bad publicity, and the abolition of forced arbitration applies largely to individual claims, but employee activists are hopeful the momentum will grow - by employer's proactive measures, rather than as a means of crisis management.
The #MeToo movement seeks to "reframe and expand the global conversation around sexual violence." It wants "perpetrators to be held accountable and...strategies implemented to sustain long-term, systemic change." Unfortunately, on Wall Street, the proliferation of mandatory arbitration agreements may be drowning out some of these voices and smothering the sparks of systemic change.