Hiding from Justice: Second Circuit Says IBM Safe from ADEA Accountability

Hiding from Justice: Second Circuit Says IBM Safe from ADEA Accountability

By Tabitha Woodruff, A2J Project Outreach Attorney

Imagine being caught violating the civil rights of more than 20,000 Americans and their families, and then the court system HELPS you hide the evidence and avoid facing trial. If you were a person who had broken the law, this would be unthinkable. But if you are a corporation, you often can count on our court system to help you avoid punishment. IBM is the latest corporation to benefit from this shocking trend that weakens civil rights laws to strengthen the arbitration contracts that corporations make people sign.

On August 4, 2023, the U.S. Circuit Court of Appeals for the Second Circuit, in New York, wrote a decision saying that the arbitration contracts IBM had 26 former employees sign protect the company from facing credible claims it violated the Age Discrimination in Employment Act (ADEA).

From 2013 until 2018, IBM laid off more than 20,000 Americans over age 40. Top executives strategized about replacing these workers with younger new hires, calling them “gray hairs,” “old heads,” “dinobabies,” and a “dated maternal workforce.” All of this was revealed in a major report from ProPublica and confirmed in a determination from the Equal Employment Opportunity Commission. When the EEOC’s report was completed in 2020, it showed that “an agency analysis of IBM employment data for 2013 through 2018 found that more than 85% of those the company targeted for layoff were older workers.”

As IBM pushed thousands of workers out the door, it required them to sign arbitration contracts in order to receive their severance pay. The contracts (1) required workers to turn to an arbitrator for help instead of a judge in court; (2) banned them from taking any action against IBM together; (3) set a deadline for them to bring their claims; and (4) kept key evidence and paperwork top secret.

IBM is now weaponizing the terms of its arbitration agreement to prevent the employees it has discriminated against from bringing their claims in any forum, including arbitration. Before asserting an ADEA claim in court, workers must first file a charge with the Equal Employment Opportunity Commission so that the EEOC can keep an eye on employer wrongdoing. In the courts, there is a rule that workers who have not timely submitted an EEOC charge may still assert their ADEA claim in court if they can “piggyback” on another’s timely filed class wide EEOC charge. This is known as the single-filing rule and saves the EEOC time and paperwork. The EEOC does not want all 20,000 former IBM workers to file unique charges with them when only one EEOC investigation of IBM needs to be completed. 26 former IBM workers tried to ”piggyback” in this case. But IBM was able to convince the Second Circuit, in a decision released last January to apply the deadline for requesting arbitration as the deadline for “piggybacking” or filing an EEOC charge. This is a radical departure from settled law and a big hit to workers’ civil rights. By switching up deadlines – a seemingly procedural holding – this decision allowed the arbitration contract to strip workers of their substantive rights by blocking all avenues to bring their claims. This all but eliminated their substantive rights. The IBM workers have civil rights claims that would be timely and actionable in court, but now they have no recourse against IBM’s age discrimination.

To add insult to injury, the Second Circuit allowed IBM to keep crucial evidence of the company’s age discrimination practices secret. IBM has aggressively used its arbitration agreement’s confidentiality provision to hide its pattern of systemic discrimination and prevent former employees from using crucial evidence. Court proceedings are public, and if one employee has evidence that the company was engaging in age discrimination on a large scale, other victims get access to that information and can use it to bring their own claims. The Second Circuit incorrectly stated the Federal Arbitration Act has a “strong policy of protecting the confidentiality of arbitral proceedings,” and that this nonexistent policy “readily outweighed the public’s right to access this information.”

Corporations have long promoted the falsehood that arbitration is only a change in forum: individuals have all the same rights they would in a courtroom, just through a cheaper and more efficient process. This decision makes it clear that is not what arbitration agreements are for. They are designed to remake the entire process until it barely functions at all, making illegal and discriminatory conduct easier than ever to get away with. Out of 3,900 employment arbitrations conducted by the American Arbitration Association from 2003 to 2007, corporations won 78.6% of the time (more often than they would have won in court). When employees DID win in arbitration, their average recovery was 20-25% of what they would have gotten in court.

Public Justice and its Access to Justice team will continue to fight forced arbitration, court secrecy, and preserve class actions. To learn more about our work, click here.

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