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.
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.
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.