Microsoft office in Washington, DC, metro area. Credit: Mike Scarcella/ NLJ

Microsoft Corp. on Tuesday became the first major U.S. company to publicly support a federal effort to restrict employment agreements that prevent sexual harassment victims from going to court, marking the most visible example of the reckoning that companies large and small are experiencing amid the #MeToo movement.

The company announced it will end its practice of mandatory arbitration, and Microsoft said it will support pending federal legislation that confronts this common employment practice.

Microsoft in the Trump era has been particularly outspoken in support of immigration and sexual orientation equality, and against government surveillance and secrecy.

“The easiest mistake any employer can make is to assume that 'this could never happen here,'” Brad Smith, the company's chief legal officer, said in a blog post Tuesday. “While it's natural to hope and believe that's the case, one of the fundamental lessons of recent months is that people's voices need to be heard if their problems are to be addressed.”

Smith continued: “As each news story about sexual harassment demonstrates, current approaches in this area have proven insufficient. Even as we look squarely at the sins of the past, we must take stronger steps to prevent these problems in the future.”

Smith called for a “national reflection,” noting that the wave of stories surrounding sexual harassment “opened our collective eyes to a critical problem right under our nose.”

Companies around the country are reaching out to third-party consultants to examine their policies, updating training and investigating preventative measures to beef up current practices. Some have examined human resources internal practices and created new avenues of reporting sexual harassment claims.

The U.S. Equal Employment Opportunity Commission also plans to issue new guidelines for the first time in two decades. Observers predict an uptick in internal and external complaints given the heightened climate of reporting and awareness.

After the claims against NBC “Today” show host Matt Lauer, the media company released an internal memo saying it would engage in a review of the culture and how it could create better transparency and added an in-person training on sexual harassment awareness, in addition to its mandatory online training.

Fidelity Investments took measures as well, following sexual harassment accusations. Those new efforts included moving the chief executive's office to the same floor where her managers worked. The company brought in Grace Speights of Morgan, Lewis & Bockius to offer advice on how to improve the workplace. CEO Abby Johnson created a sexual harassment committee and conducted a cultural survey to determine where recent problems arose.

In addition to the federal legislation, several state measures, including in New York and California, are confronting mandatory arbitration policies. Even the final version of the tax bill, pending approval, includes a provision targeting these agreements.

Corporations typically favor arbitration—over federal civil actions—to speed up resolution of disputes and keep costs down. Microsoft's move indicates a potential sea change in how corporations will deal with its policies and practices in the future.

“What I have seen in the last several months amazing even to me, as far as the public nature of the allegations and the seriousness of the allegations and the swift responses,” said Ann Marie Painter, a Perkins Coie labor and employment partner in Dallas. “I am hopeful that this elevates the issue so that it is not just something to fill employers with dread and horror, and instead they realize they really do need to be thinking about how they can prevent this kind of behavior from occurring in the workplace.”

Microsoft said it was the first Fortune 100 company to support the bipartisan legislation filed by Sen. Kirsten Gillibrand, D-New York, and Sen. Lindsey Graham, R-South Carolina. The legislation would void arbitration agreements that prevent sexual harassment and discrimination accusers from going to court.  

Gretchen Carlson, whose claims of sexual harassment at Fox News led to the ouster of chief Roger Ailes, has been outspoken on the issue of forced arbitration as a “silencer” of accusers. In a statement accompanying the legislation, Carlson urged Senators to support the bill to “give a voice back to victims.”

Microsoft's Smith said he met with Graham in Washington to talk about the bill. After Smith returned to Seattle, he said he reviewed the company's policies and found contractual clauses that required pre-dispute arbitration for harassment claims in employment agreements for certain parts of the company. Effective immediately, Microsoft will waive these clauses.

Microsoft's policy moves come as the company grapples with a lawsuit that alleges a toxic male-oriented culture harmed the promotion of women and kept in place pay disparities. That case is pending in federal court in Washington state.

William Foster, a partner at Nelson Mullins Riley & Scarborough who leads the firm's employment group in Greenville, South Carolina, said companies should be careful of avoiding knee-jerk responses to workplace developments. Arbitration and settlement agreements, he said, can protect accusers as well as the company.

“Employees want to see from the top down, the company is taking a cultural groundswell to do the right thing,” Foster said. “It's really coming to light now that these policies and procedures need to be in place. Companies need to say, 'We  are not tolerating harassment in the workplace and are focusing on this top down.'”

Sandy Rappaport, a labor and employment partner at Hanson Bridgett in California, warned that the federal legislation limiting these agreements may be written either or both overly broad and overly narrow. She said the legislation is broad because it goes to all kinds of sex discrimination and not just sex harassment, but at the same time it does not address other discriminatory harassment.

“This is a reaction to, 'Oh, gosh, this has been happening so long and how can we get it not under the rug anymore.' I think this particular law goes beyond the issue and could make things more confusing,” Rappaport said.

She added, “Folks have known for years [sexual harassment] is not lawful and felt the ability to get away with it. I do like that they are looking at options for passing laws that will prevent that.”

 

Read more:

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