First Major U.S. Bank to End Forced Arbitration of Sexual Harassment Claims

By Audrey Roofeh

Wells Fargo announced yesterday that it would end mandatory arbitration of sexual harassment claims for its nearly 260,000 employees.

Mandatory arbitration has exploded in use over the last twenty years, as it is faster, cheaper and more private than litigation, making it attractive to businesses. For workers, however, damages awards are smaller than in litigation and the likelihood of winning is lower. Also, arbitration is generally confidential, making it harder for coworkers, shareholders and the public to know what is happening inside a business. 

Various states have enacted legislation prohibiting mandatory arbitration as part of efforts to create workplace change in response to the #MeToo movement. New York, California, Washington, and New Jersey have all passed laws barring forced arbitration of harassment and discrimination claims, but these efforts have been curbed by federal law, which limits the ability of states to legislate on mandatory arbitration. While these efforts may spur change to federal law over time, efforts to limit the practice of mandatory arbitration have sprouted in shareholder action. Wells Fargo notes in a press release that the decision came after a shareholder proposal put forward by Clean Yield Asset Management sought an end to the practice. Clean Yield indicates that they have filed proposals at various companies, seeking to end the practice.

This is a significant event because Wells Fargo is the first big U.S. bank to end the practice. Some leaders in the tech industry have already taken action, including Facebook, Microsoft and Alphabet (Google's parent company).