Arbitration of Cases Involving Sexual Assault or Sexual Harassment Claims

 

On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”) amending the Federal Arbitration Act (“FAA”) to allow employees alleging claims of sexual assault and sexual harassment to bring such claims in federal, state, or tribal court regardless of whether they signed an arbitration agreement with their employer. The Act applies retroactively to arbitration agreements formed before the Act was passed, as it applies “with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” 

The Act may apply to claims other than sexual harassment or assault claims if those other claims are brought by the employee in the same case in which the employee brings the sexual harassment or assault claims. Section 402 of the Act governs not just sexual misconduct claims, but cases that relate to such disputes. “[N]o predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which . . . relates to the sexual assault dispute or the sexual harassment dispute.” This suggests courts should not sever the sexual misconduct claims, while sending other claims to arbitration. 

The bill’s wording will encourage workers to add claims of sexual assault to avoid having their cases sent to arbitration, said Ohio State law professor Sarah Rudolph Cole, according to Bloomberg Law.

The Act also bypasses delegation clauses, and perhaps the separability doctrine, by providing “The applicability of this chapter to an agreement to arbitrate and the validity and enforceability of an agreement to which this chapter applies shall be determined by a court, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement, and irrespective of whether the agreement purports to delegate such determinations to an arbitrator.”

 

Missouri Supreme Court Enforces Arbitration Agreement in At-Will Employment

An at-will employee argued that his promise to arbitrate was not supported by consideration. Soars v. Easter Seals Midwest, 563 S.W.3d 111 (Mo. 2018). While both lower courts agreed with the employee and thus refused to compel arbitration, the Missouri Supreme Court reversed because the agreement “includes a delegation clause, identical to the one upheld in Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), providing:

The Arbitrator, and not any federal, state, or local court or agency, shall have

exclusive authority to resolve any dispute relating to the interpretation,

applicability, enforceability or formation of this Agreement including, but

not limited to any claim that all or any part of this Agreement is void or

voidable.”

“For [employee] to properly contest the validity of [this] delegation provision, he must have challenged the delegation provision specifically,” according to the Missouri Supreme Court. “The delegation provision is supported by adequate consideration because the provision, severed from the rest of the Agreement and considered by itself, is a bilateral contract supported by consideration.” So the court held that it was for the arbitrator to consider the employee’s other arguments.

In contrast, two dissenters “believe the arbitration agreement in this case is not enforceable because it lacked legal consideration due to Soars’ at-will employment status.”

Lisa Larkin of Baker Sterchi Cowden & Rice LLC covers the case with more details.

Supreme Court to Decide Arbitration of Independent Contractor Disputes

The Supreme Court agreed to decide New Prime Inc. v. Oliveira.

Oliveira agreed to work for Prime under an Independent Contractor Operating Agreement stating that the relationship between the parties was that "of carrier and independent contractor and not an employer/employee relationship." This contract said the parties agreed to arbitrate "any disputes arising under, arising out of or relating to [the contract], . . . including the arbitrability of disputes between the parties."

Oliveira filed a class action alleging that Prime violated the Fair Labor Standards Act, as well as the Missouri minimum-wage statute, by failing to pay its truck drivers minimum wage. Prime moved to compel arbitration under the FAA. Section 1 of the FAA provides that the Act shall not apply "to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." The Supreme Court has interpreted this section to "exempt[] from the FAA . . . contracts of employment of transportation workers."

The First Circuit Court of Appeals denied Prime's motion to compel in stating “a transportation-worker agreement that establishes or purports to establish an independent-contractor relationship is a contract of employment under § 1,” and thus excluded from the FAA.

Commentary by the U.S. Chamber of Commerce and Public Justice

Uber Arbitration Agreement Held Unconscionable

Uber was sued by its drivers and sought to compel arbitration of that suit. A California federal court refused to enforce the delegation clause (which said questions concerning the enforce-ability of the arbitration clause would be resolved by the arbitrator) and then held the arbitration clause substantively unconscionable because: it eliminates plaintiffs’ right to bring certain claims in any forum; has an impermissible fee-shifting clause; and “permits Uber to litigate the claims most valuable to it in court . . . while requiring its drivers to arbitrate those claims. . .they are most likely to bring against Uber,”