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In surprise move, Republican attorneys general go after big business

Timing is everything.

Steve Wynn, a major Republican donor facing multiple allegations of sexual harassment and assault, attends a ceremony hosted by another major Republican facing multiple allegations of sexual assault. (CREDIT:  Chris Farina/Corbis via Getty Images)
Steve Wynn, a major Republican donor facing multiple allegations of sexual harassment and assault, attends a ceremony hosted by another major Republican facing multiple allegations of sexual assault. (CREDIT: Chris Farina/Corbis via Getty Images)

On Monday evening, every single attorney general of every American state or territory joined a rare letter, which called on Congress to limit a common tactic that employers use to protect themselves from accountability when they violate the law.

The explicit purpose of the letter to congressional leaders was to urge Congress to ban what are known as “forced arbitration” clauses preventing victims of workplace sexual harassment from suing their employers. The letter, signed by Democrats and Republicans alike, represents a surprisingly broad admission by many of the nation’s leading Republican lawyers that an exploitative practice pushed by Republicans on the Supreme Court often leaves workers without meaningful recourse when their rights are violated.

To explain, forced arbitration agreements require individuals to sign away their right to sue in a real court, and instead bring disputes in a privatized arbitration system that favors corporate parties. Courts often treat these agreements as if they were entered into willingly. In reality, employers frequently order their employees to agree to forced arbitration under pain of termination.

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Nor should there be any doubt why employers would engage in such strong-arm tactics. Data compiled by the Economic Policy Institute (EPI) reveal that employees are less likely to prevail over employers in arbitration than in a real court, and when employees do prevail in arbitration, they typically receive much less money.

Forced arbitration in employment, moreover, largely exists due to a Supreme Court decision that misread federal law. Though the Federal Arbitration Act of 1925 requires courts to enforce arbitration agreements in certain contexts, that law exempts contracts involving “workers engaged in foreign or interstate commerce.” Nevertheless, in Circuit City Stores v. Adams, five Republican members of the Supreme Court voted that the Federal Arbitration Act applies to workers engaged in foreign or interstate commerce.

Republicans in Congress, meanwhile, have been equally aggressive in protecting forced arbitration agreements. Last year the Consumer Financial Protection Bureau (CFPB), which at the time was still led by Democrat Richard Cordray, promulgated a rule preventing many financial firms from using forced arbitration agreements with their customers. This rule was swiftly invalidated, however, by a largely party-line vote in the Republican-led Congress.

The resolution overruling the CFPB rule was signed by Republican Donald Trump.

So the fact that every Republican attorney general in the country came out against forced arbitration, albeit only in a limited context, is a big deal. These clauses are nurtured by Republicans on the Supreme Court and shielded from harm by Republicans in Congress and the White House. And the attorneys’ general admission that forced arbitration is harmful, even if limited to the context of sexual harassment, is a major concession.

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Forced arbitration’s proponents often justify it by claiming that it is beneficial to all parties. As Justice Anthony Kennedy claimed in Circuit City, “arbitration agreements allow parties to avoid the costs of litigation, a benefit that may be of particular importance in employment litigation, which often involves smaller sums of money than disputes concerning commercial contracts.” But, of course, as EPI’s data shows, one of the primary costs avoided by arbitration agreements is the cost employers must pay to compensate victims of illegal activity.

If Kennedy’s argument breaks down in the context of sexual harassment suits, there’s little reason why it wouldn’t break down in other contexts as well. Ultimately, however, a broader attack on forced arbitration will probably require a new Congress, a new president, and — given the Supreme Court’s willingness to manipulate the law in Circuit City — a new set of justices.