Force the Issue sexual harassment arbitration campaign reaches 391 firms

March 30, 2021

At least three wealth managers — and 388 other publicly traded companies — have pledged to end an employment practice that critics say is harmful to victims of sexual harassment.

The number has soared from just five firms in September 2019, when Rachel Robasciotti of impact investing manager Adasina Social Capital and two collaborators began asking more than 3,500 public companies whether they require arbitration of employees’ sexual harassment claims. Robasciotti and other advocates argue that arbitration enables companies to conceal the claims from investors and the public while protecting serial harassers.

Employers including at least 15 wealth managers listed in the Force the Issue database usually require arbitration of sexual harassment through provisions of their employment contracts with financial advisors and other staff, experts say. The novel dataset compiled by Robasciotti, consumer activist Shannon Coulter of the Grab Your Wallet Alliance and workplace equity researcher Iris Kuo of Ledbetter provides more metrics for gender-lens investing, as well. If firms didn’t respond to Force the Issue, they’re marked as “probably” requiring forced arbitration.

“Because it's such a common practice and yet so harmful, it was a unique issue where we felt really comfortable in our methodology saying that,” says Robasciotti. “I think they just really didn't want to see their name next to that harmful practice.”

By the numbers

The available data about forced arbitration is striking. More than 60 million American workers are subject to forced arbitration, according to a 2018 study by the progressive Economic Policy Institute. Earlier studies have shown that employees are less likely to win in arbitration than in federal and state courts; they also receive lower damages than in court if they do prevail. The mandatory arbitration policies have worked to “the severe detriment of sexual harassment victims” in particular, an August 2020 paper in the Harvard Negotiation Law Review says.

In an email, American Arbitration Association spokeswoman Victoria Castelbuono noted that its rules don’t “impose any confidentiality requirements on parties or their representatives.” The organization’s Employment Due Process Protocol governs the guidelines, Castelbuono says.

“The protocol was developed by a task force composed of individuals representing management, labor, employment, civil rights organizations, private administrative agencies, government, and the American Arbitration Association,” Castelbuono says. “The goal,” she adds “is to provide fairness and equity in resolving workplace disputes.”

Representatives for the second largest provider of private arbitration forums, JAMS, didn’t respond to a request for comment.

FINRA administers the arbitration cases that are most familiar to advisors. Representatives for the regulator sent a March 2018 letter in which CEO Robert Cook responded to senators who had inquired about sexual harassment cases in its forums. Between 2010 and 2017, there were 68 cases in FINRA arbitration that concerned sexual harassment, according to the regulator.

“In the absence of an agreement to arbitrate a statutory employment discrimination claim at FINRA, the individual broker can pursue these claims in a court of competent jurisdiction or as otherwise specified by federal and state law,” Cook wrote. “As a result, we do not believe that our arbitration data is necessarily indicative of the prevalence of discrimination in the financial industry.”

Arbitration provisions of employment contracts often include waivers of class action rights as well, removing that option for victims, according to advocates. Filing a complaint with the Equal Employment Opportunity Commission represents another potential route; still, 54% of the more than 78,000 sexual harassment cases that reached resolutions in the past 10 years ended with findings of “no reasonable cause,” according to the agency.

Share of U.S. workplaces with mandatory arbitration, by industry

For victims often subject to “subtle but destructive” retaliation by firms after reporting sexual harassment, the available statistics on outcomes of cases “clearly show poor odds” for employees in arbitration, according to Jennifer Schwartz, a partner with employment law firm Outten & Golden.

“It deprives employees of power and leverage and reduces their chances of winning at trial,” Schwartz said in an email. “Arbitrators frequently hold in favor of employers, who are the parties often paying the bulk of the fees for arbitration. Moreover, arbitrators are far less likely to award substantial damages for the emotional distress caused victims of sexual harassment.”

Wealth management reckoning?

At least 391 firms with 10.3 million workers told Force the Issue they “definitely” have stopped requiring arbitration or never did so for sexual harassment claims, according to the database. Out of 20 public wealth managers and other listed firms active in the sector, only Wells Fargo, Focus Financial Partners and Principal Financial Group have joined the group, the website states. A fourth firm, Morgan Stanley, enabled employees to opt out of it starting in August 2019.

The dearth of wealth managers joining big technology firms that banned the practice in the wake of the #MeToo movement doesn’t surprise Robasciotti, she says. In a 2018 survey by Financial Planning parent company Arizent, wealth management professionals reported the highest rates of prevalence of sexual harassment, above seven other industries.

Rachel Robasciotti of Abacus Wealth Partners and Adasina Social Capital

Rachel Robasciotti is the director of advocacy engagement with Abacus Wealth Partners and the founder of impact investing firm Adasina Social Capital.

“Our industry is so full of sexual harassment,” Robasciotti says. “Finance has its own reckoning to do around this issue in particular ... I’m really looking forward to having other large financial companies follow that leadership.”

Force the Issue could prompt such changes in multiple sectors, after bringing together investors with a combined $54 billion in assets in its campaign urging companies to cease the practice. The group of investors that signed its statement includes the AFL-CIO, the Los Angeles City Employee Retirement System, Trillium Asset Management and Walden Asset Management. The investors cite high costs from “absenteeism, low productivity and staff turnover” due to routine mishandling of valid sexual harassment claims and a “culture of acceptance” for harassment.

“This is a really basic thing that employers can do that creates a safe and inclusive environment for all employees, and especially for the women who are typically the victims of sexual harassment,” Robasciotti says.

The movement is gathering momentum after far-reaching federal legislation that would prohibit all mandatory arbitration for employees and customers failed to pass the Senate last year. Advocates like Laura Flegel, the legislative and public policy director of the National Employment Lawyers Association, say forced arbitration has significant implications in cases involving wage theft and discrimination based on gender, race, national origin and disability.

“Courts have upheld forced arbitration clauses in many, many instances where nothing was ever signed by the employee,” Flegel says, noting examples like employee manuals, onboarding materials or even email blasts to workers. “There are many instances where employees are not aware that they're bound by this.”

Big data

Although her organization seeks to ban mandatory arbitration for all types of claims, Flegel praises Force the Issue as “an interesting and important database” showing the level of secrecy and the importance to investors interested in understanding the potential liability to firms.

The site also fills in “a big piece” of missing data that’s still undisclosed by many public firms, says Marypat Smucker, the principal for research and content of gender-lens investment research firm Parallelle Finance. Pay gap data and supplier diversity figures would help publicly traded gender lens equity funds add two more screens to their models. The funds had more than $2.67 billion in assets under management at the end of 2020, according to Parallelle.

Force the Issue has “some of the data that really is needed to get a complete picture of a company's gender equity,” Smucker says. “Most of the funds have stated criteria that go beyond the cornerstone criteria of women in leadership. The gap is whether there's data on that.”

Robasciotti and the collaborators added notably to the available data the same month as her wealth management practice merged into Abacus Wealth Partners and she testified before the Senate Banking Committee in a hearing about the state of retail investing after GameStop. In its campaign, Force the Issue found sympathetic employees at some firms and even heard from a few that their inquiries had prompted companies to alter their policies.

“When I first started hearing back from companies, I kinda got the chills,” Robasciotti says. “It was such a wonderful and somewhat overwhelming experience to start seeing the change happening.”