Obama executive order on mandatory arbitration: Huge news for workers’ rights.

Obama Just Signed a Hugely Important Workers’ Rights Reform, and No One Noticed

Obama Just Signed a Hugely Important Workers’ Rights Reform, and No One Noticed

The law, lawyers, and the court.
Aug. 7 2014 6:05 PM

Obama Is on a Pro-Labor Roll

The president just signed the most important workers’ rights reform of the past 20 years.

Obama.
President Barack Obama signs the Fair Pay and Safe Workplaces executive order on July 31, 2014, in the Eisenhower Executive Office Building in Washington.

Photo by Mandel Ngan/AFP/Getty Images

If you’ve been following President Obama’s burst of enthusiasm for executive orders—I know it’s August, but hey, you’re reading this—you may have heard that he’s been flexing his muscle on behalf of labor. Last month, Obama banned federal contractors from discriminating against gay workers. For that one, he won liberal kudos and conservative scolding for refusing to exempt employers that object on religious grounds. Obama got similar attention for his order in January raising the minimum wage for new federal contractors to $10.10 an hour.

Emily Bazelon Emily Bazelon

Emily Bazelon is a staff writer at the New York Times Magazine and the author of Sticks and Stones

So it’s a little odd that the latest executive order in this bunch has gone virtually ignored (following a few dutiful daily news stories) even though it packs the biggest punch. “This is one of the most important positive steps for civil rights in the last 20 years,” Paul Bland, executive director of Public Justice, a public-interest law group, says of the July 31 order. The employer-side law firm Littler Mendelson calls it “the most sweeping order to date” that the Obama administration has aimed at federal contractors. The trade group Associated Builders and Contractors is “strongly opposed” and says the order could create a federal contractor “blacklist.”

What’s this about? Bear with me for a minute, because there’s a reason this one isn’t lighting up TV screens or Twitter. It’s important, but it’s also kind of technical. The order, called Fair Pay and Safe Workplaces, does two things. It requires companies bidding for federal contracts worth more than $500,000 to make previous violations of labor law public, if they have any to report. That’s a shaming device that the administration hopes will push companies to settle back wage claims and nudge them toward better behavior in the future.

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The second part of the order is what Bland is so excited about. This provision says that companies with federal contracts worth more than $1 million can no longer force their employees out of court, and into arbitration, to settle accusations of workplace discrimination. “Here’s why this is so important,” Bland said when I asked him to explain. “For the last 20 years, the Supreme Court has been encouraging employers to force their workers into a system of arbitration that has been badly rigged against the workers. And so this order will result in millions of employees having their rights restored to them.”

Arbitration is a private mechanism for dispute resolution. If both parties freely choose to use it rather than going to court, then it can be perfectly legitimate as well as cheaper and faster. The problem is that companies increasingly sneak mandatory arbitration clauses into the fine print of contracts with employees and consumers. Deep into the deal you sign when you take a job, or get a loan, or buy a product, is language in which you agree that you’ll settle any related dispute through a private arbitrator rather than before a judge.

And, oh, by the way, this means you won’t be able to join any class actions. These are the collective lawsuits that companies and trade groups tend to loathe and view as a form of extortion, but that consumer and worker advocates champion as a needed tool of reform. One more thing: A study of 4,000 arbitration cases found that employees complaining of on-the-job discrimination won only about 21 percent of the time. In court, they win discrimination suits 50 to 60 percent of the time, other studies show, and receive damage awards that are five times higher, on average. So you can see why Bland and other labor advocates are celebrating.

The Supreme Court has given its blessing to fine-print mandatory arbitration clauses multiple times, starting with the 5–4 case AT&T Mobility v. Concepcion in 2011. Since then, this language has spread everywhere. High-profile examples include American Apparel and the Jets, which get employees to sign on to mandatory arbitration clauses that have blocked, or probably will, suits by women for sexual harassment. And I have to mention my favorite instance, even though it’s not about workers: General Mills inserting language on its website stating that people who liked Cheerios on Facebook had agreed to resolve “all disputes related to the purchase or use of any General Mills product or service” through arbitration. After taking a beating on social media, the company backed down.

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That was a very rare outcome. Far more common are cases by employees or consumers getting thrown out of court or not being brought at all because of the arbitration clauses in fine print. According to Public Citizen, at least 139 class-action suits have died in the wake of Concepcion. They were brought by consumers who said they’d been stung by predatory lenders, or misleading mortgages, or false promises by vocational schools. And also on the line are complaints by employees of discrimination on the job. For example, suits women bring when they think they’re not being paid the same as men for the same work. Or when they think they can’t get hired because an employer thinks they’re likely to get pregnant.

Obama’s new executive order says that if you’re a federal contractor with a workplace complaint rooted in your sex, race, ethnicity, or religion, you get to go to court—unless you agree to arbitration voluntarily and after the dispute arises. This broadens a shield against mandatory arbitration that’s already in place for workers who say they’ve suffered sexual assault or discrimination at the hands of a Defense Department contractor. That one passed the Senate 68–30 in 2009. This time, signing the new order at a press conference, Obama repeated his refrain that he has to act on his own because Congress has become useless. “They voted to sue me for taking the actions we are doing to help families,” the president said, referring to House Speaker John Boehner’s claim that Obama exceeded his authority in delaying part of the Affordable Care Act.

From a pro-labor perspective, Obama is on a kind of roll. The lead lawyer for the National Labor Relations Board just freaked out business groups by ruling that “McDonald’s could be held jointly liable for labor and wage violations by its franchise operators—a decision that, if upheld, would disrupt longtime practices in the fast-food industry and ease the way for unionizing nationwide,” as Steven Greenhouse wrote in the New York Times.

The “if upheld” part, though, demonstrates the problems the president can run into if he goes it alone. An executive branch action doesn’t have the same weight as a law enacted by Congress. It’s more easily reversed or challenged in court. Obama’s orders also can be limited in scope. Since it applies to new contracts worth more than $1 million, the July 31 order affects only a slice of the 28 million employees who work for federal contractors. Bland argues that it’s still a huge deal because it treats forced arbitration as a central civil rights issue. “For the President of the United States to say that this is a substantial priority of his Administration, to the point that the United States will refuse to contract with corporations that force their workers into arbitration, is an enormous marker,” he wrote to me in an email.

Maybe someday, this will inspire some other Congress to throw the blanket over everyone. That used to happen, I swear. When the Supreme Court made it harder for employees to win discrimination suits in the 1980s, Congress responded with a 1991 law that rolled back those rulings. The same dynamic was in play when the Lilly Ledbetter Fair Pay Act passed in 2009, and Congress stuck up for workers complaining of unequal pay (but didn’t address mandatory arbitration, because it wasn’t widespread yet). Obama’s new order is one way to push back against a conservative Supreme Court majority with a strikingly pro-business record. But it takes two branches to go all the way.