Mandatory pre-dispute arbitration, secrecy, and allegations of widespread sexual harassment

by Brian Wolfman

Drew Harwell has penned this powerful article about allegations of widespread sexual harassment against the massive jewelry seller Sterling Jewelers (the corporate conglomerate behind the chain known as Galleria of Jewelry and Kay Jewelers). The article is based in large part on about 250 sworn affidavits from workers at the jewelry chain. The affidavits depict a culture of severe and pervasive sexual harassment by male managers perpetrated on women in subordinate jobs.

The allegations were made in an arbitration proceeding, not in court. That's because, according to the article, "[s]ince 1998, Sterling has forced all employees to agree to arbitration — a no-judge, no-jury resolution system that allows companies to keep potentially embarrassing labor disputes and case records mostly confidential."

As just indicated, one of the typical attributes of arbitration is secrecy. So, for example, discovery of relevant information, to the extent there is any discovery, is secret. And the arbitrator's decision is almost always secret. The fact that there is an arbitration at all is often kept under wraps as well. This is why we often hear that disputes with a particular company are subject to "private arbitration."

To be sure, court secrecy is a problem too. Too many documents are filed under seal, and cases -- even cases with significant implications for the public -- are settled under "gag" provisions that prevent the parties from talking about the case.

But almost all court complaints are publicly filed, and so the allegations are freely available to the public. Parties are generally free to talk to other people, including the press, about a pending case. And virtually all judicial decisions are public the minute they are issued. Not so, as I say, with arbitration.

How bad was the secrecy in the Sterling sexual harassment arbitration? According to Harwell, the Sterling arbitration was filed in 2008. Apparently, some documents about the case became public last April. Harwell's article appeared the day before yesterday.

(More info: Go here to view a video about the Sterling case and here to read about the corporate response to the allegations.) 

What will a Trump administration OSHA look like?

I've seen little public discussion over what the federal government's workplace watchdog -- the Occupational Safety and Health Administration -- will look like in a Trump administration. This piece by Tom Musick addresses that question, and not surprisingly it looks like we are in for less regulation of workplace hazards. Musick also notes that "Trump’s limited-regulation stance, coupled with his experience in construction and other industries [which are subject to OSHA regulation], suggest to some that he will steer OSHA more toward compliance assistance and away from enforcement." This passage in particular caught my attention:

[OSHA's] injury and illness electronic recordkeeping rule could be among the first items that Trump targets, according to [D.C. lawyer Eric] Conn. The rule requires many employers to electronically submit injury and illness data, which may then be published on OSHA’s website. Anti-retaliation protections also are included in the rule, which prohibits employers from discouraging workers from reporting an injury or illness. The rule has drawn sharp criticism from some employers, who claim it is burdensome and unnecessary. In July, eight industry groups – including the National Association of Manufacturers and Associated Builders and Contractors – filed a legal challenge to block the rule, claiming the anti-retaliation provisions unlawfully banned or limited safety incentive programs and post-incident drug testing. A judge denied the motion in November. “I could easily see, at the very least, a Trump administration curbing the publishing of that data,” Conn said. “And the other side of that same rule is the anti-retaliation elements that would prohibit some post-incident, post-injury drug testing and safety incentive programs. I could see that rule being curbed.”

"Saving for retirement? Who’s working in your best interest?"

Washington Post columnist Michelle Singletary posts some questions and answers about the Department of Labor's "fiduciary rule." The rule is intended to ensure that financial professionals helping guide your retirement investments act in your best interest. The rule was finalized in 2016 and becomes applicable on April 10. The rule has been put on hold by President Trump.

Texas's Angie Littwin Provides an Example of an Op-ed that Can be Written for Any State to Show How the CFPB Benefits Consumers in That State

In the Dallas Morning News.  The headline is Texans need to tell Ted Cruz and Jeb Hensarling to keep the Consumer Financial Protection Bureau. This is an excellent op-ed and could serve as a template for use in drafting op-eds for other states.  Excerpt:

Thanks to the bureau, Texas-based EZCORP had to stop illegally collecting debts by visiting consumers' homes and workplaces, and contacting consumers' bosses and landlords about debts. In fact, the company had to return $7.5 million to 93,000 consumers whom the company harmed. 

This issue hits home here in Texas. Nearly 45 percent of Texans with a credit file, including 44 percent of people in the Dallas metro area, have a debt in collections, not including mortgages. And debt collection is the No. 1 topic about which Texans file complaints with the agency.

These aren't careless people who live beyond their means and then need government intervention to avoid the consequences of their mistakes. These are hardworking, law-abiding Texans who are victimized by exploitative, often illegal practices that they don't understand and whose effects they can't foresee.

Automakers Knew of Takata Airbag Hazard for Years, Suit Says

That's the name of this press report by Hiroko Tabuchi and Neal Boudette. An excerpt:

At least four automakers knew for years that Takata’s airbags were dangerous and could rupture violently but continued to use those airbags in their vehicles to save on costs, lawyers representing victims of the defect asserted . . . . The Justice Department’s criminal investigation into Takata’s rupture-prone airbags has so far painted automakers as unwitting victims duped by a rogue supplier that manipulated safety data to hide a deadly defect, linked to at least 11 deaths and over 100 injuries in the United States. But the fresh allegations against Ford, Honda, Nissan, and Toyota, made as part of a class-action lawsuit in Florida and based on company documents, point to a far deeper involvement by automakers that used Takata’s defective airbags for years. Honda vehemently denied the new allegations on Monday. The three other automakers either declined to comment or said a response would come through legal channels.

Do administrative agency warnings encourage compliance with the law?

That's the topic of Administrative Law Enforcement, Warnings, and Transparency by Delcianna Winders. Here is the abstract:

Warnings are one of the primary ways that agencies enforce their regulations. Yet there is virtually no scholarship interrogating the role that warnings play in an agency’s arsenal. Are they effective in motivating compliance? If so, under what circumstances? Is reliance on warnings warranted at all? This Article tackles these important but overlooked questions.

Economic models of public enforcement suggest that warnings have no role in motivating compliance. Published data on the effectiveness of warnings is virtually non-existent. But, in what appears to be an act of faith, administrative agencies rely heavily on warnings—often as their primary enforcement mechanism. This Article scrutinizes this use of warnings, through both a theoretical assessment and a case study of their efficacy in one particular context—the federal Animal Welfare Act (AWA). After showing that that warnings issued under the Animal Welfare Act appear to frequently fail to incentivize compliance, the Article then assesses why this might be and discusses the implications of this failing for the many administrative agencies that rely on warnings. It also makes policy recommendations for improving the efficacy of warnings, including recommendations about disclosure that are especially timely given recent moves by the federal government to delete thousands of enforcement-related records from its websites.

Trump's pick to run Medicare and Medicaid thinks maternity coverage should be optional. Here's why she's wrong.

That's the name of this article by consumer journalist Michael Hiltzik. Here's an excerpt:

[Trump's pick to run the Centers for Medicare and Medicaid Services Seema] Verma demonstrated either utter ignorance about how health insurance works, or such desperation for this job that she’s willing to profess ignorance and paper it over with conservative shibboleths about “individual choice” and the freedom to make one’s own decision. She deliberately overlooked that prior to the ACA, there was no such freedom, and women were typically not given a practical choice of whether to take maternity benefits or not; they simply weren’t offered. 

WSJ: Competing Priorities Bog Down Efforts to Quickly Roll Back Dodd-Frank

Here (behind paywall). House Financial Services Committee Chair Jeb Hensarling says the Financial Choice Act will be reintroduced in the "weeks to come" (which is already later than some earlier statements had it); the Senate Banking Committee still has presidential nominations to consider; both Houses face deadlines on some matters, such as the expiration of the National Flood Insurance Program, other items in the president's agenda seem more pressing, and Democrats have their back up.   

Squires & Kirsch in HuffPo: The Consumer Financial Protection Bureau: Past, Present, and Future

Here. Excerpt:

In the wake of the recent election, the mind-boggling possibility of a return to the pre-crisis world of 2008 is now a real threat. That is precisely what would happen if Congress and the incoming Administration forget why the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted and what the Consumer Financial Protection Bureau (CFPB) has done in a few short years to restore sanity, market discipline, and fairness to consumer financial markets.

* * *

Despite criticism from some that Wall Street was saved while Main Street was ignored, consumers have benefited from elimination of the most abusive practices and compensation for at least some of their losses. The CFPB can be credited for many of these gains.

* * *

In case studies for our forthcoming book on the CFPB’s first five years, we were able to probe some of the factors that led to success compared with others that presented a challenge. 

* * *

Against extraordinary odds, the CFPB mounted a coherent and productive financial consumer protection project that pulled us back from the precipice of global financial ruin But its early achievements will continue to be put to the test as the Bureau matures, the original impulse for reform drifts further away as the recent crisis becomes a more distant memory, and political challenges mount.

The political strategy to save Richard Cordray's job as head of the Consumer Financial Protection Bureau

Read this piece by Michele Singletary, which explains that, "[i]n a preemptive move, Democrats, consumer groups and civil rights leaders have been mobilizing to defend the head of the federal consumer watchdog agency should President Trump try to fire him."