Wells Fargo is putting an end to its policy of mandatory arbitration for employees claiming sexual harassment, the bank announced Wednesday.
The San Francisco-based bank said it made the decision to end forced arbitration for all future sexual harassment claims following feedback from one of its stakeholders, impact investing firm Clean Yield Asset Management. The investing firm submitted a shareholder proposal late last year requesting a "review of mandatory arbitration’s effect on sexual harassment claims and make the report public," Reuters reported. Clean Yield has since withdrawn its proposal.
- Companies use mandatory arbitration clauses to resolve disputes outside of the court system and through an arbitrator. Critics say the practice allows companies to keep complaints from coming to light and avoid costly lawsuits. A 2015 study found that arbitration overwhelmingly favors employers and can cover up misconduct from repeat offenders.
"Wells Fargo has zero tolerance for sexual harassment," David Galloreese, head of human resources at Wells Fargo, wrote in a company blog post. "We believe that this is the appropriate change to make at this time for our employees. The treatment of sexual harassment claims has become an increasingly prominent issue across industries. We’ve taken many steps to create and maintain a workplace environment that promotes and protects the safety and well-being of our employees."
The decision by the nation's fourth-largest bank to end the policy, which applied to employees hired since 2015, drew praise from Clean Yield, which owns about a $2,000 stake in the bank, according to Reuters.
"By the ending the use of mandatory arbitration for sexual harassment claims, Wells Fargo has raised the bar for financial institutions aiming to root out sexual harassment in the workplace," Molly Betournay, Clean Yield's director of shareholder advocacy, said in a statement. "This is a win for Wells Fargo’s more than 250,000 employees. We encourage other companies, particularly other big banks, to follow suit."
David Gottlieb, a partner at Wigdor LLP, who specializes in sexual harassment cases, applauded the bank’s change to its policy, but said he believes the move is "too little, too late."
"They should waive their arbitration policy for all employees for all claims of discrimination, retaliation and mistreatment," Gottlieb told Banking Dive.
A Wells Fargo spokesperson told Banking Dive the policy change applies to future workplace sexual harassment claims only.
Gottlieb said the bank is reacting to the #MeToo movement but failing to address other areas of discrimination.
"What about claims of gender or pregnancy discrimination?" he said. "There are other forms of discrimination, like age and race, and a variety of other categories, too. But rather than just react to what the popular movement currently is, what they should do is waive arbitration agreements for all their employees for all claims."
In wake of the #MeToo movement, other large tech companies including Microsoft, Google and Facebook have removed the clause from their own policies in the past few years, but forced arbitration remains widespread on Wall Street, according to Bloomberg.
Gretchen Carlson, the former Fox News commentator who co-founded the advocacy group Lift Our Voices, said in a statement she hopes Wells Fargo’s decision inspires other banks to follow suit.
"Wells Fargo likely believes that it's in their financial interest, perhaps in the way of goodwill and marketing to hold themselves out as a company that is being more favorable to women," Gottlieb said. "But if they genuinely wanted to do good, they would waive their arbitration agreement for all claims of discrimination of any kind. And I imagine each bank will do its own analysis about what's in their own financial interest."
The bank has been under scrutiny from lawmakers and regulators since 2016, when its employees were found to have created roughly 3.5 million fake accounts to receive sales-based incentives.