January 21, 2021
As a member organization, the Financial Industry Regulatory Authority ("FINRA") only affords votes to its member firms. Indeed, FINRA is a "self" regulatory organization to the extent that we all acknowledge that the "self" is its member firms in contradistinction to those firms' employees and customers. Unfortunately, FINRA's conflict of interest as engendered by its employer/member-firms comes at the expense of independence in the service of all other stakeholders. In a recent sexual harassment case brought by a former female employee against Morgan Stanley, we see how FINRA's rulebook favors its member firms. Worse, FINRA's management and its Board must be aware of the inequities yet fail to reform the conduct.
An Alleged Matter of Harassment and Retaliation
Anna Jasicki became a Morgan Stanley employee in 2011, but by May 2019, she had filed a three-count complaint in New Jersey Superior Court alleging disparate
treatment and hostile work environment, sexual harassment and discrimination,
and retaliation pursuant to the New Jersey Law Against Discrimination.
Anna Jasicki, Plaintiff/Appellant, v. Morgan Stanley Smith Barney LLC, Morgan Stanley Wealth Management d/b/a Morgan Stanley, and James Lloyd, Defendants/Respondents
(Opinion, New Jersey Superior Court/Appellate Division, Docket No. A-1629-19T1 / January 19, 2021) (the "NJAD Opinion")
As alleged in part in the NJAD Opinion:
[T]he complaint alleged plaintiff's supervisor, Lloyd, had
committed various acts of sexual harassment and when she rejected his
advances, he retaliated against her. The complaint also alleged when plaintiff
complained about Lloyd's conduct to Morgan Stanley, it protected Lloyd and
retaliated against her.
at Page 2 of the NJAD Opinion
A Matter of Convenience?
In response to Plaintiff Jasicki's state lawsuit, Defendants filed a Motion to Compel Arbitration based in large part on the contention that in 2015, Jasicki had agreed to arbitration after failing to opt out of the "Convenient Access to Resolutions for Employees" (the "CARE" program):
Specifically, defendants argued that on September 2, 2015 at 3:19 p.m., Morgan Stanley's human resources email account sent an email to plaintiff's work email
with the subject line, "Expansion of CARE1 Arbitration Program." The body of
the email read:
Expansion of CARE Arbitration Program
September 2, 2015
More than [ten] years ago, Morgan Stanley
launched CARE . . . the [f]irm's internal employee
dispute resolution program. CARE provides employees
with a quick and neutral way to raise and address
workplace concerns. By combining internal (informal
resolution) and external (mediation and arbitration)
dispute resolution mechanisms, CARE promotes open
and honest communication, increases mutual respect,
and resolves employment-related concerns swiftly,
fairly[,] and economically.
Current registered employees are required to
arbitrate most workplace claims under existing FINRA
[Financial Industry Regulatory Authority] rules, and
given the success of the CARE program, Morgan
Stanley is announcing the expansion of CARE and
modifications to related [f]irm policies and programs to
extend arbitration obligations for all U[.]S[.] employees
- registered and non-registered. Effective October 2,
2015, arbitration under the CARE Arbitration Program
will be mandatory for all employees in the U.S., and all
covered claims between the [f]irm and employees will
be resolved through final and binding arbitration on a
non-class, non-collective and non-representative action
basis as more fully described in the Arbitration
Agreement and CARE Guidebook. Please review the Arbitration Agreement and the CARE Guidebook. It is
important that you read and understand the Arbitration
Agreement and the CARE Guidebook as they describe
the terms, features[,] and details of this program.
By continuing your employment with Morgan
Stanley, you accept and agree to, and will be covered
and bound by the terms of the Arbitration Agreement
and the arbitration provisions of the CARE Guidebook,
unless you elect to opt out of the CARE Arbitration
Program by completing, signing and submitting an
effective CARE Arbitration Program Opt-Out Form by
October 2, 2015 . . . . If you remain employed and do
not timely complete, sign and submit an effective
CARE Arbitration Program Opt-Out Form, the [f]irm's
records will reflect that you have consented and agreed
to the terms of the Arbitration Agreement and the
arbitration provisions of the CARE Guidebook. You
will not have an opportunity to opt out at a later date.
Importantly, should you choose to opt out of the
Arbitration Agreement and CARE Arbitration Program,
you will continue to be bound by the terms of any other
arbitration agreement or obligation applicable to you.
Your decision to opt out of the Arbitration Agreement
and the CARE Arbitration Program will not adversely
affect your employment status with the [f]irm.
If you have questions about the Arbitration
Agreement or the arbitration provisions in the CARE
Guidebook, email firstname.lastname@example.org.
at Pages 3 - 4 of the NJAD Opinion
Plaintiff Jasicki argued that there was no proof that she had agreed to the CARE Arbitration Program, and that Respondents had merely demonstrated that she had received an email transmitting the CARE policies (the "CARE email") on September 2, 2015. In response, the Respondents asserted that Plaintiff's office mailbox had been in working order on the date of transmission of the CARE email, and, further that metadata disclosed that the transmission had been "Read."
Superior Court Orders Arbitration
On December 5, 2019, the New Jersey Superior Court dismissed Plaintiff Jasicki's Complaint and the lower court ordered arbitration. The lower court found that Plaintiff had not opted out of the CARE program by the October 2, 2015, deadline, and, consequently, Jasicki was on notice that her continued employment constituted her agreement to arbitrate in accordance with the policies.
Appellate Division Affirms
On appeal to the NJAD, the appellate court affirmed the Superior Court. In pertinent part, NJAD found that:
[P]laintiff does not dispute that she received the
CARE email. The email subject line and its body unmistakably pertained to the
CARE Arbitration Program. Contrary to plaintiff's argument, the outcome in
Skuse did not turn on the multiplicity of communications sent by Pfizer. Rather,
as the Skuse Court noted, an employee's failure to review the contents of an
email does not invalidate an arbitration agreement. Moreover, arbitration was
not unilaterally imposed; plaintiff had time to either opt out or, as in Skuse,
assent to arbitration by continuing to work for Morgan Stanley. For these
reasons, we reject plaintiff's argument this dispute centers on metadata or that
defendants were required to prove the extent to which she read the CARE email,
beyond presenting objective evidence that she received the email, in order to
compel arbitration of plaintiff's claims.
at Pages 14 - 15 of the NJAD Opinion
Bill Singer's Comment
Let's review the FINRA Rulebook:
FINRA Code of Arbitration Procedure for Industry Disputes Rule 13201: Statutory Employment Discrimination Claims and Disputes Arising Under a Whistleblower Statute that Prohibits the Use of Predispute Arbitration Agreements
(a) Statutory Employment Discrimination Claims
A claim alleging employment discrimination, including sexual harassment, in violation of a statute, is not required to be arbitrated under the Code. Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose. If the parties agree to arbitrate such a claim, the claim will be administered under Rule 13802. . . .
FINRA Code of Arbitration Rule 13201(a) asserts in pertinent part that "a claim alleging employment discrimination . . . is not required to be arbitrated under the Code." That's a sensible approach. Employment disputes that allege bona fide violations of one's constitutional rights should not be litigated before a FINRA arbitration panel because, as far as I'm concerned, FINRA is nothing more than a glorified trade group, which is too often a lap dog in the service of its large member firms. As a result of that role, FINRA is conflicted and tends to promulgate and enforce rules favoring its member-firm-employers at the expense of the industry's employees. All of which highlights the arch cynicism inherent in the second sentence of paragraph Rule 13201(a):
Such a claim may be arbitrated only if the parties have agreed to arbitrate it, either before or after the dispute arose. If the parties agree to arbitrate such a claim, the claim will be administered under Rule 13802.
FINRA's Rule 13201 says that employment discrimination claims are not required to be arbitrated: "may be arbitrated only if the parties have agreed to arbitrate . ." Sure, that seems magnanimous and who the hell is going to argue with the rights of each American citizen to freely choose whether to arbitrate or not?
Here's the problem with all that crapola in Rule 13201: It's virtually impossible to become an employee of any FINRA member firm without agreeing to an arbitration provision that eviscerates your right to opt out of the mandatory arbitration of employment discrimination disputes.
In Jasicki, the absurdity of FINRA's hypocrisy is revealed in Morgan Stanley's argument that its employee was offered the chance to "agree" to mandatory arbitration up to October 2nd, at which time either the employee must "opt out" or will be deemed to have "agreed" to mandatory arbitration. Not stated in that wonderful CARE email is the consequences of opting out. Oh sure, the email says "Your decision to opt out of the Arbitration Agreement and the CARE Arbitration Program will not adversely affect your employment status with the [f]irm," but is that what a reasonable employee would truly believe? And for those of you who would still argue with me -- who would still close their eyes and hold their nose -- let me make it VERY clear that there is nothing voluntary about the version of arbitration forced upon the men and women who work at Morgan Stanley. If you want to disagree, then first consider these very words from Morgan Stanley's cited September 2, 2015, email [Ed: highlighting added]:
Effective October 2, 2015, arbitration under the CARE Arbitration Program will be mandatory for all employees in the U.S. . . .
If there was, in fact, no consequence to opting out of the CARE Arbitration Program, then why did Morgan Stanley even need to resort to the negative consent protocol?
If there was nothing coercive whatsoever about the new (in 2015) arbitration program, wouldn't the proof be that enrollment is fully voluntary?
Why the need to deem inaction as consent -- why not deem an employee's inaction as constituting a declination of the new arbitration protocol?
And just where the hell is Wall Street's vaunted self-regulatory-organization, FINRA, when its member firms engage is such practices that seem little more than transparent circumventions of the spirit of the regulator's rules?
In Jasicki, Morgan Stanley implements an after-employment-began demand transmitted as a negative response via email. Note that Jasicki began her employment in 2011 but the email was dated 2015 -- some four years into her employment. You do nothing as an employee and you are automatically enrolled in this so-called voluntary (yet admittedly "mandatory") alternative dispute resolution program. Does that strike you as a voluntary agreement? Morgan Stanley's gamesmanship (and that of many of FINRA's Large Members) violates the spirit of Rule 13201 and renders that provision little more than hypocritical garbage -- and does so in the face of FINRA and with the self-regulator's apparent approval.
If FINRA and its undistinguished Board of Governors truly cared about protecting the industry's employees and ensuring that its members adhered to the credo of "conduct consistent with just and equitable principles of trade," then the self-regulatory-organization would have promulgated a rule that enshrined the civil rights of the industry's men and women. Rule 13201 should have insisted that no employment agreement could contain a mandatory arbitration provision pertaining to "statutory employment discrimination claims." Further, the use of a so-called negative consent coupled with the alternative of a formal "opt out" should not be permitted. An agreement must have the indicia of being voluntary and without a whiff of coercion. That requires asking an employee, after they have been hired and without any implication to their ongoing employment status, to voluntarily choose to fill out and execute a separate arbitration agreement.
The willingness to arbitrate should not be extracted via a take-it-or-leave-it employment offer that presents a default demand to waive that very right to disagree as a precondition for industry employment. On my Wall Street, employers would submit negotiable employment agreements that would not be permitted under FINRA Rule to include any arbitration provision. Following the execution of said agreement and after the onset of employment, I welcome -- I invite -- the free negotiation of whatever arbitration agreement an employer and a then-existing-employee would each agree to enter into. Such an agreement would indeed be the product of free negotiation and free will -- unlike the coerced arbitration agreements that now exist industry-wide. Frankly, FINRA Rule 13201 is a hideous bit of cynicism that is made all the more offensive by FINRA's wink and nod.