Mandatory pre-dispute arbitration, secrecy, and allegations of widespread sexual harassment

by Brian Wolfman

Drew Harwell has penned this powerful article about allegations of widespread sexual harassment against the massive jewelry seller Sterling Jewelers (the corporate conglomerate behind the chain known as Galleria of Jewelry and Kay Jewelers). The article is based in large part on about 250 sworn affidavits from workers at the jewelry chain. The affidavits depict a culture of severe and pervasive sexual harassment by male managers perpetrated on women in subordinate jobs.

The allegations were made in an arbitration proceeding, not in court. That's because, according to the article, "[s]ince 1998, Sterling has forced all employees to agree to arbitration — a no-judge, no-jury resolution system that allows companies to keep potentially embarrassing labor disputes and case records mostly confidential."

As just indicated, one of the typical attributes of arbitration is secrecy. So, for example, discovery of relevant information, to the extent there is any discovery, is secret. And the arbitrator's decision is almost always secret. The fact that there is an arbitration at all is often kept under wraps as well. This is why we often hear that disputes with a particular company are subject to "private arbitration."

To be sure, court secrecy is a problem too. Too many documents are filed under seal, and cases -- even cases with significant implications for the public -- are settled under "gag" provisions that prevent the parties from talking about the case.

But almost all court complaints are publicly filed, and so the allegations are freely available to the public. Parties are generally free to talk to other people, including the press, about a pending case. And virtually all judicial decisions are public the minute they are issued. Not so, as I say, with arbitration.

How bad was the secrecy in the Sterling sexual harassment arbitration? According to Harwell, the Sterling arbitration was filed in 2008. Apparently, some documents about the case became public last April. Harwell's article appeared the day before yesterday.

(More info: Go here to view a video about the Sterling case and here to read about the corporate response to the allegations.)