Over the past couple of years, as part of the ‘#metoo’ movement, many high-profile sexual harassment cases have been reported and discussed in the public eye. However, because many high-ranking corporate officers have employment agreements with arbitration terms, the resolution of many of these cases may end up shrouded in secrecy, away from the public eye.
For example, Leslie Moonves, former CBS Corporation Chairman and CEO, was terminated by CBS Corp. in September after multiple women alleged sexual misconduct against Moonves. CBS refused to pay Mr. Moonves’ $120 million severance under his employment contract because he was terminated for cause, and therefore not eligible for the severance payment under the terms of his contract. However, pursuant to that same employment contract, the parties can elect to arbitrate disputes between Mr. Moonves and CBS. Mr. Moonves elected for binding arbitration in January of 2019. This means that Moonves’ fight to challenge his ‘for cause’ termination – by litigating over whether he indeed engaged in sexual harassment – will be decided outside of the courts, in a confidential proceeding.
In binding arbitrations, the arbitrator has the ability to issue a decision that is recognized and enforced by courts. The process and detailed findings of the arbitrator, if any are made, are kept out of the public eye and these decisions are rarely subject to appeal through the courts.
Arbitration agreements are not just for millionaire CEOs like Moonves; all types of companies use these agreements with all levels of employees. Regularly, companies require employees to agree to arbitration for future claims against them as a condition of their employment.
How is arbitration different from litigation?
Arbitration certainly has its pros and cons for the parties. While it is quicker and often less expensive than litigation, arbitrators can still charge hundreds of dollars per hour. Arbitrators are also not bound by the same rules of evidence or procedure that apply in court. One “pro”, especially for Mr. Moonves, is the party who bears the cost can also be articulated in the employment agreement; CBS Corp. is paying Mr. Moonves’ legal bills and will cover the cost of arbitration if Mr. Moonves is successful in his challenge. The costs will be split if CBS’ decision is confirmed.
Critically for Moonves and CBS, arbitration is also less transparent then litigation. In litigation, proceedings are open to the public, and all of the parties’ case filings are public record, with rare exception. Arbitrations are closed to the public, and the evidence, filings, and decisions are kept confidential. In court litigation, parties are afforded wide latitude to perform discovery and obtain documents and other evidence from the opposing party. In arbitration, employees and employers are constrained in the types and volume of discovery they can seek.
In the Moonves case, both sides benefit from the confidential nature of arbitration. This lack of transparency may help shield Mr. Moonves and CBS from future public scrutiny of their actions. Often, employees would prefer to submit their claims to a jury of their peers and go after their employers in a public forum.
Courts generally enforce arbitrations agreements, and recent history, including cases like the Moonves case, show us that arbitration of employment disputes is here to stay.
We can help you approach all types of employment agreements, arbitration agreements and the arbitration process with confidence. Should you have any questions on this or any other employment matters, please feel free to contact Bennett & Belfort P.C.