Morgan Stanley’s Racial Bias Behavior Gets a Federal Pass

By CultureBanx Team

  • Morgan Stanley to settle racial bias case in arbitration instead of federal court

  • Only 6% of wealth managers in the U.S. are black

Former Morgan Stanley (MS +0.60%) wealth manager John Lockette just lost the battle to have his racial bias suit against the brokerage firm heard in a U.S. federal court. Instead a judge ruled the claim must be settled in mandatory arbitration, as the deck of injustice continues to get stacked.

Why This Matters: Lockette’s complaint will be formally judged by Judicial Arbitration and Mediation Services (JAMS), a private for profit arbitration firm. The fees will be paid for by Morgan Stanley which range from $500 per hour to $10,000 a day and the bank is a frequent user of JAMS services. So if the bank is paying the fees and consistently does business with them, there could be built in potential bias with the arbitration process that should be impartial.

Wall Street has been a leader in the implementation of mandatory arbitration contracts

Wall Street has been a leader in the implementation of mandatory arbitration contracts. This represents a major challenge because only 6% of wealth managers in the U.S. are black, according to the Bureau of Labor Statistics.

The number of U.S. employees covered by mandatory arbitration agreements now exceeds 55%. Morgan Stanley updated its employee arbitration contracts to ban racial discrimination claims and class actions in 2015. They sent out a mass company wide email to over 20,000 employees, including Lockette.

Mandatory arbitration clauses bar workers from filing lawsuits against their employers for a variety of civil-rights and labor complaints. This forces employees to have their complaint heard in a private and secret forum.

Situational Awareness: Arbitration is seldomly favorable to employees when going up against major institutions. Cornell University research found win rates can drop as low as 12% in arbitration when a company uses the same arbitrators often, compared with a more than 30% success rate in federal court.

CBx Vibe:On Your Own” Jorah Smith