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Forced Arbitration Ends for Sexual Misconduct: Court Caseload and Budgeting Implications

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By David L. Baker and Ann Marie Johnson
May 2, 2022

President Biden signed bipartisan legislation on March 3, 2022 that prohibits forced arbitration agreements for alleged workplace sexual misconduct. The “Ending Forced Arbitration Sexual Assault and Sexual Harassment Act of 2021,” amends Title IX of the U.S. Code. It simultaneously transforms civil rights pertaining to workplace gender and harassment issues, as well as contract law involving the Federal Arbitration Act (FAA), which was adopted in 1925. It makes any mandatory predispute arbitration agreements concerning sexual misconduct invalid and retroactively unenforceable.

The merits of the changes are both dramatic and irrefutable, but this statutory reform introduces unaddressed considerations. It does not recognize that there are likely impacts for increased court caseloads and budgetary resources. Congress may ignore how the federal court system absorbs appellate cases arising from the new law. However, for state courts perennially scrapping for adequate funding, the new law may create challenges and represents a “federal unfunded mandate.” Such mandates impose statutory requirements, including budgetary impacts, on subordinate governments without appropriating the means to fund them.

Stakeholders need an understanding of the implications of ending forced arbitration for workplace sexual misconduct. This article provides context while raising issues for court and budget managers. It also alerts elected policymakers and taxpayers about possible budgeting fallout.

Arbitration—Troubled Sexual Misconduct Resolution Forum

Under the FAA, arbitration, including “forced” or “mandatory,” serves as an alternative dispute resolution forum. It assists in relieving congested court calendars and speeding-up dispute resolutions while curbing costs. Throughout the past 30 years arbitration has become increasingly common in employment areas. A 2017 Economic Policy Institute (EPI) study finds more than 53 percent of nonunion private employers mandate arbitration. Extrapolating, EPI estimates that more than 60 million Americans forfeit court access concerning employment rights.

Arbitration is quite different from “having your day in court.” It does not require a judge and standard court procedures, nor a legally reasoned opinion as part of an official record. While legally binding, its privacy does not provide guidance to future litigants nor public awareness of allegations and findings. Forced arbitration often empowers the employer to choose the arbitrator. Critics believe employer selection favors the employer since they are the most likely to generate future business. Thus, the issue of unequal bargaining power arises, which normally the judicial process addresses with oversight from an appellate court. 

Employees share widespread confusion about arbitration. Many overlook what forced arbitration clauses mean or the significance of forfeiting their “day in court.” Its lack of transparency misses the opportunity to discourage abusive behavior. Alarmingly, this also paves the way for retaliation against those reporting sexual misconduct while shielding existing and prospective employees from insights regarding toxic cultures. In view of these troubling aspects, the National Association of Attorneys General have supported legislation since 2018 that ensures sexual misconduct victims of their “day in court.”

Court Caseload Implications

Court caseload impacts arising from the new law present uncertainties. Research has not yet projected a likely range of increased cases across the nation’s courts or how quickly lawsuits might materialize under the new law. Opponents of ending forced arbitration suggest that its elimination will ignite a costly litigation upsurge. After all, the motivation for the FAA was to address certain acrimonious conflicts outside of court dockets more quickly and affordably. Court proceedings, particularly with juries, proceed at a slower pace while increasing litigant expenses and court costs funded by taxpayers.

Those who support ending forced arbitration contend more good than unverified harm comes from the new law. They assert court caseload increases roughly reflect population growth rather than new frontiers of litigation and note that the law still permits employees alleging sexual misconduct to agree to voluntary arbitration. The normative value of increased court access outweighs any uptick in court filings arising from the new law. Plus, there are cost sharing incentives for consolidating similar disputes into class actions, which were previously stymied under secretive resolutions. Consolidating also mitigates caseload increases.

Budgetary Implications

The benefits of increased court access for sexual misconduct litigants requires monitoring. The extent and timing of any new budgetary resources for state courts must be assessed. Savvy court and budget managers need a proactive approach. Caseload indicators require development to gauge the transitional impact of shifting these arbitration cases to court calendars. Documentation justifying supportive resources will be needed to inform elected policymakers. The National Center for State Courts, Conference of State Court Administrators and Government Finance Officers Association all have a collaborative opportunity here. 

Those controlling the public purse need to engage stakeholders in this transition. Activists for greater legal protections concerning gender discrimination and sexual harassment have effectively used legal strategies and public spaces to bring attention to the undesirable aspects of forced arbitration. Powerful platforms (e.g., #MeToo and Timesup.org) addressing Hollywood spectacles and misogynistic corporate cultures continue to play an essential role in breaking through the societal inertia to reckon with sexual misconduct. Policymakers would be wise to invite diverse representatives interested in the new law’s impacts to budget hearings. Informed citizen engagement could bolster supporting appropriations to cover any discernable court caseload and budgetary impacts.

Author: David L. Baker, Ph.D., is emeritus professor of public administration, California State University, San Bernardino. He has 30 years of experience in public agency management including more than 12 years as chief executive officer in two California counties. His research interests include public budgeting, public management, e‑government, organizational behavior and the scholarship of teaching. He may be reached at [email protected].

Author: Ann Marie Johnson is associate professor of management, California State University, San Bernardino. She received her JD/MA from the University of Cincinnati and Ph.D. at the University at Albany. She worked at the Michigan Court of Appeals and U.S. Dept. of Housing and Urban Development in Washington, DC. Her research interests include law, social equity, regulation and human resources. She may be reached at [email protected].

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