Arbitration Clauses in Summer Associate Contracts for Employment

For those of you who don’t follow the lawprof listserv, Ben Davis (Toledo) had an interesting link to an article describing the use of arbitration clauses in summer associate employment contracts.  In response to that message, Brian Farkas, one of Cardozo’s super adjuncts, had this response that I thought would be enlightening for our broader readership.  (btw – I am always surprised by the number of practitioners who tell me they follow the blog.  Thanks!)  Thanks for letting us repost it here Brian.

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For those who don’t follow Twitter obsessively, an interesting arbitration-related controversy unfolded over the weekend. Here’s a brief summary:

It began on Saturday when Ian Samuel, a lecturer at Harvard Law, tweeted images of a summer associate employment agreement from Munger Tolles & Olson LLP. The agreement requires arbitration of all disputes, and specifically includes claims under Title VII of the Civil Rights Act. It also requires that all information regarding the claims and/or resolutions be held “in the strictest confidence.” Some quickly raised concerns about the relative bargaining power of the parties, the #MeToo movement, and potential abuse by the firm. The tweets caught the attention of numerous law professors and lawyers, who began tweeting directly at Munger. Some even suggested that law school deans prohibit Munger from participating in on-campus interviews. By Sunday afternoon, Munger had reversed its policy, tweeting that they would “no longer require any employees, including summer associates, to sign any mandatory arbitration agreements.”

Does public shaming have a role to play in shaping arbitration behavior? Last week, my Cardozo Law School students read about potential legislative solutions to many of the problems scholars have identified in consumer and employment arbitration, which are often contained in contracts of adhesion. But for better or worse, legislative solutions are tricky; the Supreme Court interprets the Federal Arbitration Act to preempt (and invalidate) numerous state statutes. Arbitration agreements like Munger’s have been continually upheld by the courts. Indeed, firms regularly advise their business clients to use these exact sorts of agreements.

So perhaps social norms must be part of the discussion for reform, rather than pure legislative approaches. Maybe the solution is not a law that prohibits confidential arbitration clauses in employment agreements, but rather a norm that makes it unpalatable or gauche for a company to include such a provision. Or perhaps the solution is a norm that encourages specific carve-outs to broad arbitration clauses. The Munger example shows that the market (or at least a hyper-elite sector of the market) is responsive to bad publicity, particularly at the moment of contract formation.

As an ADR enthusiast, however, I worry about attaching any sort of shame to arbitration. My fear is that it could make an already misunderstood process feel even more “evil” or “unfair” in the eyes of the public. We consider the non-public nature of arbitration to be a feature, and not a bug. Do we really want to make arbitration “scary”? Arbitration advocates argue that public policy should favor a system that pushes employees to read their contracts carefully and negotiate them. Arbitration advocates also argue that arbitration can be substantively better than litigation for certain types of disputes. On the other hand, as the #MeToo movement reflects, confidential arbitration can remove important social issues from public discourse.

All food for thought as we pack our bags for the American Bar Association Section of Dispute Resolution Conference in DC next week…

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