As we mark Latina Equal Pay Day, Congress must pass the FAIR Act to narrow the wage gap
As we soberly recognize today as Latina Equal Pay Day — highlighting the fact that Latinas on average earn just 51 cents to every dollar earned by their white male counterparts — let’s not just talk about the need for stronger equal pay laws, but about how our existing equal pay laws are being enforced, or not. The reality is that employers are thwarting our equal pay laws through an increasingly common strategy — forced arbitration.
Forced arbitration is a term of employment often buried in the small print of employee handbooks and employment contracts that bars workers from taking their claims to court or even a state agency. In other words, as a condition of employment, workers “agree” to waive their enforcement rights under our equal pay laws (and any other employment law). Instead, workers must take their complaint to an arbitration company where a private judge — often paid by the employer — decides their case.
After California enacted the Fair Pay Act in 2015, employers were openly advised to use forced arbitration to avoid liability. Unsurprisingly, the use of forced arbitration has continued to rise and by 2024, it is forecasted that over 80 percent of private-sector, non-union workers will be bound by a forced arbitration agreement.
The damaging impact of forced arbitration on the pay gap is three-fold. First, it is often impossible to assess or remedy systemic pay discrimination through private arbitration. Forced arbitration agreements typically bar workers from bringing their claims together, so rather than challenging pay practices as a group or a class, workers must arbitrate their claim individually. This piecemeal approach is not only inefficient, it is ineffective because individual arbitrations only provide remedies for the individual employee. By comparison, class actions attack and remedy illegal pay practices for all affected employees.
For example, earlier this year, the California Civil Rights Department, the California Division of Labor Standards Enforcement and private counsel reached a $100 million settlement with Riot Games for claims including systemic pay and sex discrimination. Most of the women in this case had signed arbitration agreements and would have had to each individually bring their claim in arbitration. It was only because state agencies took on the case that the claims could be brought in court. As a result, the women obtained comprehensive workplace reforms and ongoing independent expert analysis of pay, hiring, and promotion practices.
This kind of systemic relief would never have been awarded through individual arbitration. And, importantly, the unlawful pay discrimination would never have been made public because of the second pernicious feature of forced arbitration — secrecy.
Forced arbitration typically requires workers to be bound by confidentiality. At the height of the #MeToo movement, forced arbitration was exposed as a key tool companies use to conceal sexual harassment complaints. Companies are likely motivated to similarly conceal any equal pay complaints. And what we know from the #MeToo movement is that when workers’ claims are shunted into arbitration, and privately resolved, there is no public awareness or accountability to ensure that companies are taking action to address the larger problem.
Third and finally, forced arbitration is inherently designed to favor employers. The private decision makers are often paid for by the employers and many employers are repeat players. As one defense attorney put it, “I use the same arbitrators over and over, and they get paid when I pick them. They know where their bread and butter comes from.”
In 2020, only 4.1% of consumers and workers won in arbitration. As described in a recent report by the American Association for Justice, more people climb to the top of Mount Everest in a year than win their arbitration case.
Not only is there well-documented bias favoring employers in arbitration, but arbitrators are also mostly white and male — the demographic that makes the full dollar to everyone else’s change. In the latest demographic survey of the two largest arbitration companies, JAMS and AAA, over 70 percent of arbitrators were male and about 88 percent were white.
On Latina Equal Pay Day, let’s not just demand stronger laws and better policies, let’s demand our right to enforce them. Congress must pass the Forced Arbitration Injustice Repeal (FAIR) Act now to ensure our equal pay laws are meaningful and effective.
Jessica Ramey Stender is the Policy Director & Deputy Legal Director at Equal Rights Advocates, which advocates for gender justice in the workplace and schools. Mariko Yoshihara, Legislative Counsel & Policy Director at the California Employment Lawyers Association.