by Arthur Bryant, Chairman, Public Justice
*This piece was originally posted in Public Justice's blog.
An eye-opening piece by Stephen Davidoff Solomon in The New York Times highlights a huge, unappreciated danger of corporations requiring employees to sign mandatory arbitration “agreements” to get or keep their jobs – hiding outrageous misconduct, including sexual harassment.
Solomon demonstrates that mandatory arbitration isn’t just bad because it bars workers from having their day in court. It also keeps misconduct – including extensive sexual harassment – secret from investors, customers, other workers and the public, so bad behavior and actors can thrive.
Dov Charney, the CEO of American Apparel, was unanimously fired by the company’s Board of Directors late last month. Charney was dramatically over-the-top and openly publicized his sexual focus. In 2004, a female reporter from Jane magazine watched him engage in oral sex and then wrote about it. The article was full of quotes from Mr. Charney like, “Masturbation in front of women is underrated.”
When a series of sexual harassment charges were made, Charney continued with his Board’s full support. After the company’s financial performance decreased, however, and an arbitrator issued a finding of sexual harassment, American Apparel let him go.
Charney got away with it for so long, at least in part, because employees were required to sign agreements to have all disputes handled through arbitration. As a story in the New York Times explains:
Arbitration hearings, unlike trials, are usually closed, and any filings are more likely to be sealed, often enabling defendants to avoid embarrassment and maintain their powerful positions.