While the act bars only the forced arbitration of sexual harassment and sexual assault claims, it is an important first step in restoring employees’ ability to bring discrimination and harassment claims in open court.
By Andrew M. Moskowitz and James E. Burden
“Forced arbitration isn’t court. … Proceedings are conducted in secret, often by arbitrators selected and paid for by the employer … Forced arbitration shielded perpetrators, silenced survivors, and enabled employers to sweep episodes of sexual assault and harassment under the rug. And it kept survivors from knowing if others have experienced the same thing, in the same workplace, at the hands of the same person.”
-Remarks by President Joe Biden at signing of H.R. 4445, “Ending forced Arbitration of Sexual Assault and Sexual Harassment Act of 202r”
On March 3, 2022, President Joseph R. Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, Pub. L. No. 117-90, 136 Stat. 26 (codified at 9 U.S.C. §§ 401, 402). The act, which was introduced by Sen. Kirsten Gillibrand, D-New York, and Sen. Lindsey Graham, R-South Carolina, and passed unanimously in the Senate, limits the use of pre-dispute arbitration agreements and class action waivers covering sexual assault and sexual harassment claims. It represents a sea change with respect to the forced arbitration of employment claims and reverses decades of federal precedent compelling employees to arbitrate statutory claims against their employers. While the act bars only the forced arbitration of sexual harassment and sexual assault claims, it is an important first step in restoring employees’ ability to bring discrimination and harassment claims in open court.
Precedent on Arbitrability of Employment Claims
Prior to the act, the precedent on the enforceability of arbitration agreements was clear and unmistakable: assuming that the arbitration clause unambiguously advised a party that she was waiving her right to pursue statutory claims in court, it was enforceable under the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. The FAA provides that “[a] written provision in … a contract … to settle by arbitration a controversy thereafter arising out of such contract or transaction … [is] valid,
irrevocable, and enforceable.” The FAA’s “purpose was to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements upon the same footing as other contracts.” Gilmerv.Interstate/JohnsonLane,500 U.S. 20, 24, 111 S. Ct. 1647, 1651 (1991). As interpreted by the courts, the FAA establishes a “liberal federal policy favoring arbitration agreements,” and, as such, requires courts “to enforce arbitration agreements according to their terms.” EpicSystems.v.Lewis,138 S. Ct. 1612, 1621, 200 L. Ed. 2d 889 (2018) (citation omitted).
The U.S. Supreme Court has held that the FAA preempts state law barring arbitration. Specifically, in AT&TMobilityv. Concepcion, 563 U.S. 333, 131 S. Ct. 1740 (2011), the court noted that “our cases place it beyond dispute that the FAA was designed to promote arbitration … [and reflects] ‘a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.’” The court noted further that “a prime objective of an agreement to arbitrate is to achieve ‘streamlined proceedings and expeditious results,’ ‘which objective would be ‘frustrated’ by requiring a dispute to be heard by an agency first.” New Jersey courts have followed this precedent. See, e.g., Antonucciv.CurvatureNewco, 470 N.J. Super. 553, 557, 564 (App. Div. 2022) (holding that 2019 amendment to Law Against Discrimination that prohibited “the waiver of procedural and substantive rights” under the statute was “pre- empted when applied to an arbitration agreement governed by the FAA.”).
Thus, for decades, the rule has been clear: Employees who had signed arbitration agreements either as a prerequisite for employment or at some point after their employment had commenced waived their right to pursue those claims in court. The forced arbitration of discrimination and sexual harassment claims resulted in these matters being shrouded in secrecy. For example, the Employment Arbitration Rules of the American Arbitration Association require the arbitrator to keep the proceeding confidential. Specifically, Rule 23 of the AAA Employment Arbitration Rules states that “the arbitrator shall maintain the confidentiality of the arbitration and shall have the authority to make appropriate rulings to safeguard that confidentiality, unless the parties agree otherwise or the law provides to the contrary.”
The Ending Forced Arbitration Act provides that, at the election of the “person alleging conduct constituting a sexual harassment dispute or sexual assault dispute … no predispute arbitration agreement … shall be valid or enforceable,” 9
U.S.C. § 402(a). Similarly, a party bringing a sexual harassment or sexual assault claim may invalidate any “predispute” agreement purporting to prohibit or waive the right of one of the parties to the agreement “to participate in a joint, class, or collective action.” Finally, even if the arbitration agreement provides to the contrary, the enforceability of the arbitration agreement “shall be determined by a court, rather than an arbitration.”
There can be little dispute that, in altering the “‘liberal federal policy favoring arbitration,’” Atalese v. U.S. Legal Services Group,219 N.J. 430, 438 (2014) (quoting Concepcion, 131 S. Ct. at 1745), the act has dramatically altered the landscape for sexual assault and sexual harassment claims. However, as set forth below, there are several important issues that will or may limit the scope of the act.
The precedent so far indicates that the act is not applicable to conduct that preceded the March 3, 2022, enactment of the act. As set forth in Section 3 of P.L. 117-90, the Ending Forced Arbitration Act “appl[ies] with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” Courts have interpreted this provision to mean that, where a party alleges conduct that occurred prior to March 3, 2022, the act does not preclude enforcement of a predispute arbitration clause. See, e.g., Zinskyv.Russin, Civ. No. 2:22-cv-547, 2022 U.S. Dist. LEXIS 130115 (W.D. Pa. July 22, 2022) (where alleged sexual assault occurred prior to March 3, 2022, fact that plaintiff filed complaint on April 11, 2022, did not preclude enforcement of arbitration agreement); Walters v. Starbucks, 22cv1907 (DLC), 2022 U.S. Dist.
LEXIS 153228 (S..D.N.Y. Aug. 25, 2022) (where plaintiff filed a lawsuit on March 7, 2022, and alleged that she had been subject to a hostile work environment that began in July 2020 and ended in December 2021, the act was not applicable because “each of [plaintiff]’s claims accrued at the time she experienced discrimination, harassment, or retaliation, and at the latest by December of 2021, when she left her job.”).
The act declares that any “predispute arbitration agreement” may not be enforced against “the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute.” It defines the term “predispute arbitration agreement” to be “any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement.” Thus, where an employee signed an arbitration agreement as part of the hiring process, it clearly would not be enforceable against her if she subsequently sought to assert a claim for sexual harassment. However, an employer who is faced with a sexual harassment claim may then try to compel the complaining employee to execute an arbitration agreement. For example, where an employee files a complaint with human resources in which she alleges that she was sexually assaulted and/or harassed, the company could present her with an agreement requiring her to arbitrate her claims. It should be noted, however, that there is precedent in New Jersey that threatening and ultimately terminating an existing employee for refusing to sign an arbitration agreement constitutes unlawful retaliation in violation of the New Jersey Law Against Discrimination. See Ackerman v. TheMoneyStore, 321 N.J. Super. 308 (Law Div. 1998).
The act applies to “conduct constituting a sexual harassment dispute or sexual assault dispute.” It defines the term “sexual harassment dispute” to be “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” Questions remain as to whether related claims that are asserted are covered by the act. Thus, for example, where a party alleges that she was sexually harassed and brings claims for a hostile work environment and gender discrimination, does the latter constitute a “dispute relating to” a claim for sexual harassment? The statute does not answer this question.
Research has only disclosed one case addressing this issue. Specifically, at the end of February 2023, U.S. District Judge Paul A. Engelmayer of the Southern District of New York, an appointee of President Barack Obama, held that the act bars compulsory arbitration of a race discrimination claim where claims of sexual harassment were also included in the operative pleading. See Johnsonv.Everyman,22 Civ. 6669 (PAE), 2023 U.S. Dist. LEXIS 31242 (S.D.N.Y Feb. 24, 2023). In so holding, the court noted that “the scope of the invalidation of the arbitration clause [encompasses] the entire ‘case’ relating to the sexual harassment dispute.” The court therefore held that “where a claim in a case alleges ‘conduct constituting a sexual harassment dispute’ … the EFAA, at the election of the party making such an allegation, makes pre- dispute arbitration agreements unenforceable with respect to the entire case relating to that dispute.”
All parties agree that, for sexual harassment and sexual assault claims that arose after March 3, 2022, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 will eliminate or, at a minimum, greatly curtail the practice of requiring employees to arbitrate these claims. The initial consensus is that, where the conduct giving rise to the claim occurred prior to March 3, 2022, the act is not applicable.
The extent to which the act will impact claims “related” to sexual harassment and sexual assault remains unknown.
Evan Silagi, who is counsel at Berkowitz, Lichtstein, Kuritsky, Giasullo & Gross, assisted with the preparation of this article.
Andrew M. Moskowitz is a partner and James Burden is of counsel at Javerbaum, Wurgaft, Hicks, Kahn, Wikstrom & Sinins, where they focus their practice on employment law.
Reprinted with permission from the ISSUE DATE MARCH 13, 2023 issue of NEW JERSEY LAW JOURNAL. © PUBLICATION YEAR 2023 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved
