Dive Brief:

• Wells Fargo has ended mandatory arbitration for employees in connection with any future sexual harassment claims effective immediately, the bank announced Feb. 12.
• Per the announcement, the company's mandatory arbitration policy "generally applies to employees hired since December 11, 2015." Wells Fargo said it made the decision following dialogue with stakeholders including Clean Yield Asset Management, which submitted a shareholder proposal on the subject in late 2019.
• "This is the appropriate change to make at this time for our employees," David Galloreese, Wells Fargo senior executive VP and head of HR, said in a separate statement. "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."

Dive Insight:

Wells Fargo is the latest in a series of large employers to eliminate mandatory arbitration in the sexual harassment context. Last year, this trend was particularly notable among tech companies including Google, which ended the practice months after a sex harassment scandal spurred employee protests, as well as Facebook, which did so just one day after Google's decision.

The bank is likely still looking to regain public and employee trust in the aftermath of a 2017 scandal that led to fines, employee lawsuits and restructuring in many levels of the organization. Though news outlets and commentators pointed to pressures to meet sales goals as a cause of the scandal, some front-line Wells Fargo employees say they still experience mistreatment, The Guardian reported last year.

Beyond potential trauma, sexual harassment can have long-term career consequences, particularly for women. According to a 2019 report by the American Association of University Women (AAUW), sexual misconduct impairs women's physical and emotional health, reduces their job choices, limits their career development opportunities and can lead to their departure from the workforce entirely. Employment practices such as nondisclosure agreements and mandatory arbitration can also be detrimental to victims because they prevent victims from speaking out, AAUW said.

In a 2017 public hearing at the U.S. Equal Employment Opportunity Commission (EEOC), witnesses diverged over the merits of mandatory arbitration for both workers and employers. Some argued that the agreements help preserve confidentiality for victims and can lead to quick resolutions. But others countered that mandatory arbitration creates a chilling effect on victims' reporting. Arbitration isn't necessarily ideal for employers, either, according to sources who previously spoke to HR Dive, because it can lead to higher costs and may leave employers with fewer appeal options in some cases.

Despite heightened attention on sexual harassment prevention, as well as increased filing of sexual harassment charges to the EEOC in recent years, investigation and training procedures remain a point of criticism for employers. Some commentators express doubt that HR can effectively prevent harassment given its role in defending employers from legal responsibility. Others believe that the profession's impact on organizational culture present opportunities for meaningful changes, like implementing a better understanding of bystander psychology into prevention practices.