The folks at Public Justice have written a bog post about the pernicious use of mandatory arbitration by American Apparel, a major U.S. clothing manufacturer. Based on an article in the New York Times, the post recounts the story of Dov Charney, long-time CEO of American Apparel. Mr. Charney was known for such witticisms as "Masturbation in front of women is underrated." He was profiled in Jane magazine in 2004. See article. Indeed, he masturbated in front of the reporter during the interview. How compelling.
American Apparel required mandatory arbitration agreements for all employees and models. There were at least five claims of sexual harassment by American Apparel employees and one claim that he kept a "sex slave." These women sued in court trying to break the arbitration agreement. But, each time, the court upheld the agreement. No one knows how many claims in total were paid or brought in some secret arbitration proceeding. All this was kept from investors, customers, employees and the public for years. The dirty secret about arbitration is that it is not open court. Whatever happens in arbitration stays in arbitration.
See Public Justice blog post.