Forced Arbitration Enables Employers to Evade New Coronavirus Paid Leave Law

Earlier this month, Congress took an important first step to provide relief to workers by passing the Families First Coronavirus Response Act, which requires some employers to provide their workers with up to 10 days of emergency paid sick leave and, where necessary, up to 12 weeks of public health emergency leave for workers to manage childcare amid school and daycare closures. Unfortunately, this new law exempts employers with more than 500 workers from coverage — including most big box stores.

It’s essential that Congress mend that gaping hole in the law — representing 54 percent of all workers. But there’s another major loophole that undermines workers’ ability to stay home during this crisis when they or their loved ones get sick or are in quarantine or isolation: Forced arbitration.

The problem is that although Congress authorized employees to sue their employer if they fail to follow the new law, unscrupulous employers can simply use forced arbitration provisions to escape their legal obligations.

Forced arbitration requirements deny workers the right to go before a judge and jury when their employer breaks the law. Instead, workers must bring any claims to a secret proceeding before a private arbitrator who is not accountable to the public. And because these arbitrators depend on corporations for repeat business, they strongly favor employers.  

These requirements can be imposed on workers when they start a job or at any time after they’ve been hired. Workers don’t need to sign anything — an employer can simply amend their handbook to impose forced arbitration.

A full 56 percent of non-union private-sector employees are now subject to forced arbitration requirements, including over 64 percent of workers earning less than $13 per hour, 59 percent of black workers, and nearly 58 percent of women workers. Making matters even worse, class and collective action waivers routinely incorporated into these requirements prevent groups of employees from banding together to challenge employer lawbreaking. Instead, they’re forced to proceed in arbitration alone, without their coworkers. 

Forced arbitration requirements, in short, will allow employers to shirk their legal responsibilities to provide critical leave and other worker protections during this grave public health crisis. This means that too many workers living paycheck to paycheck will show up sick to work, rather than forgoing pay.

In the Families First Act, Congress authorized employees to file civil actions to enforce the new paid sick leave requirements, both individually and together with other affected employees. Under the bill, covered employers who deny employees their right to emergency paid sick days could be liable for double the required compensation for each day of sick leave they make employees work. Employers who deny employees their right to access public health emergency leave will be liable for double damages (e.g., lost wages, salary, benefits or other compensation, or double actual monetary losses). And employers who fire or threaten to fire employees for attempting to use their emergency sick days or public health emergency leave will be subject to hefty penalties for retaliation.

The fear of incurring these costs — and of public scrutiny — will give many otherwise-reluctant employers sufficient incentive to comply with the new law. But forced arbitration requirements enable unscrupulous employers to avoid and cover up nearly all this liability, undercutting a key incentive for businesses to do the right thing by workers at a time when our economic security is more threatened than ever.  

Recognizing that the Department of Labor is limited in its capacity to enforce these provisions across the country, Congress empowered workers to hold their employers accountable. But the deck is so stacked by forced arbitration and class and collective action waivers that employers know 98 percent of workers will simply abandon their claims — enabling employers to avoid accountability to the vital new provisions and threatening workers’ access to the emergency sick days and leave they desperately need.

Fortunately, Congress can ensure forced arbitration doesn’t enable employers to skirt the new paid leave law. In the short term, Congress can simply amend the emergency leave provisions to say that all pre-dispute forced arbitration requirements and class and collective action waivers are invalid in this particular case — when employees are seeking to enforce their rights to emergency paid sick days or public health emergency leave. The Supreme Court has recognized that Congress has this power to explicitly override the otherwise-applicable Federal Arbitration Act.

The new PAID Leave Act, introduced March 17 by Sens. Patty Murray (D-Wash.) and Kirsten Gillibrand (D-N.Y.) and Rep. Rosa DeLauro (D-Conn.), showed Congress another way to close the forced arbitration loophole. Their innovative bill bars courts from granting employer demands to force employees’ sick leave and public health emergency leave claims into arbitration, and provides that employees’ right to bring such claims with their coworkers can’t be limited by a class or collective action waiver.

Longer term, the Senate should hold an up-or-down vote on the Forced Arbitration Injustice Repeal (FAIR) Act. Passed by the House in a bipartisan vote last September, the FAIR Act would ensure that workers are protected from the silencing nature of forced arbitration requirements and class and collective action waivers.


Hugh Baran is a staff attorney and Skadden fellow at the National Employment Law Project in New York City and an expert on the rise of forced arbitration requirements. He provides direct representation to workers in low-wage industries who are subject to forced arbitration, and conducts research and advocacy aimed at restoring workers’ ability to enforce their rights before judges and juries.

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