How Arbitration Clauses Silence Women Speaking Out About Harassment

Over the past decade, Lawless has filed high-profile lawsuits against some of Silicon Valley’s most powerful companies, including Facebook and the venture-capital firm Kleiner Perkins Caufield & Byers. It was the latter case, brought on behalf of junior partner Ellen Pao in 2012, that has arguably shaped Lawless’ career more than any other. In it, Pao claimed gender discrimination when she was passed over for promotion after reporting a senior partner’s sexual harassment. Although a jury ultimately ruled in favor of Kleiner Perkins in 2015, the lawsuit has been credited with spurring a broader conversation about gender discrimination and harassment in the workplaces of Silicon Valley.

Even before the Harvey Weinstein reports broke open the floodgates of #MeToo accounts, women like Susan Fowles at Uber were coming forward with stories of misconduct, and a wave of women entrepreneurs described harassment from the investors they were pitching. Discrimination is also a widespread issue in what is still a male-dominated industry. Earlier this year, the U.S. Department of Labor accused Google of “systemic compensation disparities against women” after suing the company, a federal contractor, for salary information as part of a compliance audit. In September, three women filed a class-action suit against Google for systemic gender discrimination in pay and promotion. Former Twitter engineer Tina Huang is building a case against the social-media company on similar grounds.

The Pao case, Lawless believes, helped encourage the clients who’ve since sought her out, many of whom work in the tech industry and say they have been denied promotions, fair treatment, desirable assignments, and equal wages to their male counterparts.

“They call it the Pao effect,” she says. “Sometimes losing isn’t really a loss. You might lose the battle but you’ll win the big war.”

But Lawless knows firsthand the obstacles that remain in that fight. Large companies have more resources at their disposal than the individual employees seeking accountability. (“You had a bunch of really rich men who were going to fight this until they won,” Lawless says about Pao’s lawsuit. “I don’t even know how much money they spent on that case.”) Non-disclosure agreements often prohibit current and former employees from speaking freely about their experiences outside the workplace. And they are often prevented from taking their cases to court because of a growing trend of arbitration clauses in employment contracts.

At Lawless & Lawless, the firm she runs with her sister Barbara, Therese says that more than 90 percent of the cases are discrimination-based, and most of them never reach a jury trial. “Ninety percent of employment cases settle outside of court because it’s less expensive,” she says, “and companies don’t want their dirt exposed.”

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Settling outside of court can mean mediation, in which the parties try to reach middle ground for a settlement with the assistance of a neutral mediator. It can also mean arbitration, which means that due to an agreement between the parties, sometimes as part of an employment agreement, a claim is adjudicated in a private venue by arbitrators -- lawyers or retired judges -- who are paid by the hour. In arbitration, there are no rules of evidence and there is no public access to what happens. Arbitration clauses often include language in which the parties agree that the rulings are non-appealable, so the decision of the arbitrators is usually final. While binding, the process and format of arbitration cases are typically less formal than a traditional court setting.

It’s a tactic Lawless has seen employers use on a regular basis, requiring new employees to sign mandatory pre-dispute arbitration clauses.

That was the case when AJ Vandermeyden approached Lawless last year with a case against her employer, Tesla, the electric car manufacturing company founded by Elon Musk. After three years there, she had worked her way up to being an operations commodity manager. “AJ was trying to raise issues in the company,” Lawless says. “She wasn’t getting paid as much as her male colleagues and she complained about sexual harassment at work.”

Vandermeyden filed her lawsuit in September 2016, alleging discrimination, retaliation, and other workplace violations. Since Vandermeyden had signed an arbitration agreement when she was first hired by the company in 2013, Tesla successfully filed a motion for arbitration in January and moved Vandermeyden’s case behind closed doors. The case is still ongoing.

After Tesla successfully moved the case to arbitration—and no longer faced the threat of a jury trial—the company fired Vandermeyden on Memorial Day, despite Lawless’ claims that she had great performance reviews. “She’s the sacrificial lamb,” Lawless says. “If you speak out [they’ll] fire you. That’s against the law.”

Tesla insists they had just cause to terminate Vandermeyden for false accusations. When reached for comment about the case, a Tesla spokesperson referred Broadly to earlier statements. “Last year, we conducted a thorough internal investigation and retained a neutral, third-party expert to conduct an independent investigation of Ms. Vandermeyden’s claims,” reads the company’s statement released in May. “After we carefully considered the facts on multiple occasions and were absolutely convinced that Ms. Vandermeyden's claims were illegitimate, we had no choice but to end her employment at Tesla.”

Lawless was disappointed not to have an opportunity to take Vandermeyden’s case to court and says that arbitration is a strategy corporations use to silence employees. Which is what she believes Tesla is doing.

“They’re forcing people into arbitration so that issues that should be public are not made public,” Lawless says.

“The idea that we have courts is so fundamental to our democracy,” she adds. “Taking these cases and putting them behind closed doors is an outrage.”

The use of arbitration clauses in employment contracts like Vandermeyden’s have proliferated over the past decade as a result of multiple Supreme Court rulings, including extending the Federal Arbitration Act to include employment agreements in 2001.

“For a long time there was a concerted effort made on behalf of businesses to get the Supreme Court to allow the of use arbitration clauses as a shield against class action lawsuits,” explains David Horton, a leading arbitration expert at the University of California, Davis Law School. “Employers will say an arbitration clause benefits everybody because it allows you to get a ruling that’s quicker and cheaper, and it’s confidential so an employee can be more comfortable sharing embarrassing incidents.”

However, Horton notes that the companies who win the most in arbitration are often large businesses who arbitrate frequently. “Arbitrators repeatedly get business from those companies,” Lawless points out, “so how are they going to rule? Who’s the repeat customer?”

Employees often aren’t aware of the arbitration clauses included in their employment contract, especially when signing off on the paperwork is mandatory to start work.

“In some situations, employees can claim that the agreement is unconscionable or, in rare cases, that it wasn’t properly entered into because they weren’t aware of what they were signing,” says Rachel Arnow-Richman, an expert on employment contracts at the University of Denver Law School. But those cases are rarely granted, especially since employers today are careful to appear more reasonable by omitting clauses that require employees to travel great distances or bear the costs of arbitration.

“The trend is for savvy businesses and attorneys to draft arbitration agreements that are less one-sided than they were 15 years ago,” Arnow-Richman adds. “There’s been a pull-back on the most onerous terms to make arbitration appear more fair because it’s less cost prohibitive and inconvenient than it used to be.”

And since the outcomes are kept confidential, arbitration can shield repeat offenders from public scrutiny, making it more difficult to discern patterns of misconduct like sexual harassment and gender discrimination.

“Because arbitration is confidential, women don’t know that others are experiencing the same behaviors,” Arnow-Richman says. “[Arbitration] prevents the public from seeing patterns amongst bad actors. It also prevents the development of the law in terms of precedent-setting and end-runs the public litigation process that could shine a spotlight on these experiences.”

It’s not just the tech industry. Next year, another class-action suit against Sterling Jewelers is slated to be settled via arbitration. The case includes at least 69,000 former and current female employees alleging widespread discrimination, and hundreds of detailed accounts of women being routinely groped and pressured to accommodate sexual advances from their bosses or else risk losing their jobs. And yet, while the case was originally filed by dozens of women in 2008, it only became public in 2017 after arbitration documents were obtained by the Washington Post earlier this year.

Despite the persistent efforts to keep these cases shrouded in secrecy, female employees continue to speak up, in Silicon Valley and now Hollywood, too.

“With Harvey Weinstein, the studio was actively suppressing harassment claims by contractually requiring Harvey to settle with the victims and protecting him if he did so,” Arnow-Richman said. “Arbitration gives companies similar advantages. Because it’s a private forum, it allows them to resolve claims one-by-one, confidentially, and with no public record.”

Lawless readily admits that gender discrimination cases are much harder to prove than sexual harassment cases. There’s often more evidence of a hostile work environment when employees are subjected to crude language, physical touching, or sexual assault. It can be more difficult to demonstrate that promotion decisions are based on gender.

“You have very competent women who do not get the position and much less competent or completely incompetent men get it,” Lawless says. “That’s why we have Trump in the White House, because of the misogyny in our culture. It’s a deep hatred toward women.”

In pursuing the lawsuit against Kleiner Perkins, Pao garnered the support of powerful public figures like Anita Hill and Hillary Clinton. “[Clinton] understood what Ellen was going through,” Lawless says. “She got it.”

Lawless never anticipated that she’d wind up arguing discrimination cases against some of Silicon Valley’s behemoth companies, although her background seemed to predestine some sort of legal career. The ninth of 12 kids, she grew up hearing her lawyer father tell stories from the courtroom; today, three of her siblings are also attorneys. Lawless was also inspired by her mother, who got her nursing degree when she was 45. She remembers the gender dynamics in her family as always being relatively equal. “Everyone had to chip in and clean up after dinner,” she says.

After graduating law school in 1986, she had every intention of practicing environmental law. But she graduated into a recession and nonprofits weren’t able to pay enough to cover her student loans.

“I was an idealistic kid out of law school,” she chuckles. After stints clerking for a federal judge and working for a large law firm in Boston, Lawless joined her older sister Barbara’s firm to try her hand at employment law. Today the sisters work with two additional full-time attorneys and a handful of support staff. For the past few years, they have also partnered with a local private school to have a female high-schooler work in the office one day a week. The students have come from first-generation immigrant families, and most have gone on to enroll in college.

“We’ve had some go to law school,” Lawless says, a note of pride in her voice. “This is basically a woman-owned business and I want to show them a healthy work environment.”

Sexual harassment cases started becoming more prevalent following Weeks v. Baker & McKenzie in 1994, when a Palo Alto–based law firm had to pay $3.5 million after failing to protect at least nine female employees from the advances of a lecherous attorney. (Incidentally, Alan Exelrod, who represented Weeks, would eventually take on Pao’s suit two decades later, bringing Lawless on as his co-counsel.) As new federal legislation granted employees more workplace protections, the spectrum of Lawless’ employment-discrimination cases broadened to include race, ethnicity, sexual harassment, and wrongful termination suits.

“More people were speaking out and companies were being held accountable for sexual harassment,” she says, noting, “In the past eight years, gender discrimination has really started to come to the forefront.”

Many of her cases come out of Silicon Valley. One of the reasons Lawless believes gender discrimination is especially pervasive in the tech industry is the culture of start-up companies. “They’re usually started by young men, straight out of college,” she explains. “They generally don’t have a human resources department.”

That was the case at UploadVR, where a former employee sued for gender discrimination and sexual harassment earlier this year, alleging the company had a “kink room,” which employees used to have sex, and that it hired sex workers for company parties. (The company has since established an HR department, and the suit was reportedly settled out of court in September.) Kleiner Perkins also lacked a human resources department while Pao was employed by the company.

Losing Pao’s suit was a devastating blow but, Lawless says, “It helped me grow. I think it was good for me. I learned a lot. It showed me what’s important to me and how much work I have to do in the future.”

Today, Lawless takes heart from the Pao case. “[Ellen’s] had a huge impact on the world and on other women,” she says. “If you compare it to what’s happening in Hollywood right now, I think the time is ripe. Women have gotten a certain empowerment. In these particular fields—whether it’s Hollywood or venture capital—the industries are controlled by men who want to keep women out. Women are fed up and they don’t want to deal with it anymore.”

Correction: A previous version of this article incorrectly stated that Lawless previously worked for the Boston AG's office. While in law school, Lawless worked one summer for the California AG’s office.