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.”

 

Symposium on Labor and Employment Arbitration

Jaime Fell and everyone at #PennStateLaw organized this symposium as well as any I’ve seen. I learned a ton from Mark Gough’s data, and the abilities of each of the other speakers--Jill Gross, Rick Bales, and Ted St. Antoine—to draw on their experiences in the trenches of arbitration as well as their broader perspectives as prolific scholars.

9:30 AM — Professor Theodore J. St. Antoine's Presentation on "Making Arbitration a Fair and Accessible Remedial Process"

10:00 AM — Professor Stephen Ware's Presentation on "Labor Arbitration's Differences"

10:30 AM — Professor Richard Bales' Presentation on "What Makes a 'Reasoned' Arbitration Award?"

11:15 AM — Lunch

12:00 PM — Professor Jill I. Gross' Presentation on "The Final Frontier: Are Class Action Waivers in Arbitration Clauses in Broker-Dealer Employment Agreements Enforceable?"

12:30 PM — Professor Mark Gough's Presentation on "Employment Disputes in Mandatory Arbitration and Civil Litigation: Comparing Outcomes and Stakeholder Perceptions."

PBS Video on Employment Arbitration

This PBS documentary provocatively entitled "How Forced Arbitration Tipped the Scales" traces employment arbitration controversies from Wall Street in the 1990's to the #MeToo era. Appearances by lawyers Cliff Palefsky and Alan Kaplinsky.

Employee Remaining on the Job is Assent to Arbitration Agreement

The California Court of Appeals in Diaz v. Sohnen Enterprises, Inc. overturned a district court decision denying a motion to compel arbitration agreement.

Sohnen Enterprises held a meeting at which it informed employees that it was introducing a new arbitration agreement. Sohnen told employees that if they chose not to sign the new agreement but continued to work then that would mean they accepted the arbitration agreement. Erika Diaz refused to sign the arbitration agreement but continued to work for Sohnen from December 2 to 23. She then had her lawyer send her employer a letter saying that she planned to keep working but did not accept the arbitration agreement. After bringing a workplace discrimination case, Diaz challenged the employer’s motion to compel arguing that she never assented to the new agreement. The court of appeals, over a dissent, disagreed saying that her decision to continue work was an implied assent to the agreement. By the time her lawyer sent a letter Diaz was already bound.

National Law Review and Manatt discuss the case.

Did Arbitration Save Uber $80 Million?

Did Uber's payout to its drivers fall by $80 million due to an enforceable arbitration clause? That's the impression given by Johana Bhuiyan in the LA Times:

"Uber agreed to pay $20 million to settle lawsuits challenging the classification of drivers as independent contractors, rather than employees owed the benefits of traditional employment.

The payout is a far cry from the $100 million Uber had agreed to pay to settle the suit in 2016, after a San Francisco judge granted 385,000 drivers in California and Massachusetts class-action status. Eventually, a judge determined $100 million was not sufficient given the original class size.

But an appeals court ruling found Uber’s mandatory arbitration agreements — which obligate workers to settle their claims with the company one-on-one — were largely valid and enforceable.

That ruling, and Uber’s decision in May to maintain its policy of upholding its arbitration clause in cases unrelated to sexual misconduct, ultimately reduced the class to about 13,600 drivers, who had either opted not to agree to mandatory arbitration or drove for Uber before the company implemented such a policy."

Shannon Liss-Riordan, the plaintiffs' lawyer representing drivers, is running for U.S. Senate in a primary challenge to Massachusetts Democrat Ed Markey.

Kentucky Revives Enforceability of Employment Arbitration

Kentucky's governor recently signed a bill enabling employers to require an employee or person seeking employment to execute an agreement for arbitration as a condition or precondition of employment. This legislation overrules the Kentucky Supreme Court decision in Northern Kentucky Area Development District v. Danielle Snyder which relied on a Kentucky statute forbidding any “employer [from requiring] as a condition or precondition of employment that any employee or person seeking employment waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit to which the employee or person seeking employment would otherwise be entitled.” KSA 336.700(2). The Kentucky Supreme Court ruled the Federal Arbitration Act (FAA) did not preempt the Kentucky statute because, instead of targeting arbitration specifically, the  KSA 336.700(2) “is a law that prohibits employers from firing or failing to hire on the condition that the employee or prospective employee waive all existing rights that employee would otherwise have against the employer.”

Uber Drivers--12,500 of Them--Demand Individual Arbitrations, Each Paid for by Uber

Uber's arbitration agreements with its drivers precludes class actions and thus requires individual arbitration. "Amazingly," Allison Frankel writes, "thousands of Uber drivers did just that. Between August and November of this year, about 12,500 drivers, many of whom had been class members in cases in which Uber successfully moved to compel arbitration, served individual arbitration demands on Uber ... These thousands of drivers filed their arbitration demands at JAMS, as mandated in Uber’s contracts."

The drivers argue Uber is required to pay for their arbitration because the terms of service say "In all cases where required by law, the Company will pay the Arbitrator's and arbitration fees."

The drivers allege “As of November 13, 2018, 12,501 demands have been filed with JAMS,” the arbitration organization. : “Of those 12,501 demands, in only 296 has Uber paid the initiating filing fees necessary for an arbitration to commence [...] only 47 have appointed arbitrators, and [...] in only six instances has Uber paid the retainer fee of the arbitrator to allow the arbitration to move forward.”

Kentucky’s Non-Enforcement of Employment Arbitration Agreement Preempted by Federal Arbitration Act?

The Kentucky Supreme Court unanimously refused to enforce an agreement conditioning employment on an agreement to arbitrate. Kentucky Statute 336.700(2) “prohibits employers from conditioning employment on an existing employee’s or prospective employee’s agreement to ‘waive, arbitrate, or otherwise diminish any existing or future claim, right, or benefit to which the employee or person seeking employment would otherwise be entitled . . . .’ ”, according to Northern Kentucky Area Development District v. Danielle Snyder

Several commentators have observed conflict between this Kentucky Supreme Court ruling, and the U.S. Supreme Court’s broad holding on Federal Arbitration Act (FAA) preemption of such anti-arbitration state law:

Jackson Lewis PC said “[t]he Kentucky Supreme Court’s opinion appears to be at odds with recent U.S. Supreme Court rulings on FAA preemption of state laws that treat arbitration agreements differently than other contracts, see, e.g., Kindred Nursing Centers Lmtd P’ship v. Clark, 137 S. Ct. 368 (2016).”

Vorys Sater Seymour and Pease LLP said “[i]t seems difficult to reconcile the Snyder decision with the United States Supreme Court’s 2018 decision in Epic Systems Corp. v. Lewis … that expressly upheld mandatory arbitration agreements or its 2017 decision in Kindred Nursing Centers v. Clark that prohibits rules that single out arbitration for unfavorable treatment.”

Stoll Keenon Ogden PLLC said “[i]mportantly, the Supreme Court of Kentucky’s decision appears to conflict with recent U.S. Supreme Court precedent upholding the FAA’s broad preemptive effect. See, e.g., Kindred Nursing Centers Ltd. Partnership v. Clark, 137 S.Ct. 1421 (2017).”

I commented on Epic Systems here and on Kindred Nursing here. Kindred Nursing also involved a decision by Kentucky’s Supreme Court.

Trump Campaign Loses on Scope of Arbitration Clause

The Trump campaign's motion to compel arbitration of a former staffer's harassment suit was denied by a New York judge,  the ABA Journal reports.

The court found the arbitration clause of the staffer's nondisclosure agreement confines arbitration to any dispute "arising under or relating to this agreement,” but “does not require arbitration for any ‘dispute between the parties’ or even ‘any dispute arising out of plaintiff’s employment.”

The court wrote “The arbitration clause could have been written to require any disputes arising out of plaintiff’s employment to go to arbitration or that any claims brought by plaintiff against defendant must be sent to arbitration. But it did not.”

Article Defending Some of the Supreme Court's Controversial Arbitration Decisions

A Short Defense of Southland, Casarotto, and Other Long-Controversial Arbitration Decisions, was just published in the Loyola Consumer Law Review.

The abstract follows:

Scalding criticism of Supreme Court arbitration decisions appeared in the 1990’s and is now widespread. Over twenty years ago, the Supreme Court held that pre-dispute arbitration clauses in adhesion contracts are generally enforceable. Thoughtful scholars then feared threats to consumers' and employees' rights, and today similarly warn that the Court’s recent arbitration decisions “will provide companies with free rein to commit fraud, torts, discrimination, and other harmful acts without fear of being sued.” Professors are not the only sources of strong language opposing the Court’s arbitration decisions. Under the heading “Forced Arbitration Destroys Individual Rights,” a 2015 federal court decision declares: “Today, forced arbitration bestrides the legal landscape like a colossus, effectively stamping out the individual’s statutory rights wherever inconvenient to the businesses which impose them. What is striking is that, other than the majority of the Supreme Court, whose questionable jurisprudence erected this legal monolith, no one thinks they got it right.”

From this alleged consensus of “No one thinks they got it right,” this Article dissents in significant part. While I have long opposed Supreme Court decisions on arbitration law’s separability doctrine and judicial review of arbitration awards, and would reduce adhesive arbitration agreements’ impact on class actions, I continue to sympathize with some of the Court’s long-controversial arbitration decisions.

I choose the word “sympathize” because I believe much of the criticism of the Court’s arbitration decisions does not sufficiently weigh the difficult position the Court was in when deciding those cases. The FAA was enacted in the 1920’s before the landmark federalism case of Erie v. Tompkins, the New Deal’s expansion of the Commerce Clause and thus of federal power to preempt state law, the growth of federal employment and consumer law in the 1960’s and 1970’s, and the ensuing explosion of class actions. Each of these enormous changes to our nation’s legal landscape conflicted with the premises underlying the FAA. While Congress could have amended the FAA to accommodate and be more consistent with these enormous changes, it did not. So, reconciling an old statute with a half century of law in tension with that statute’s premises became the Court’s task.

The Courts’ critics generally argue that the drafters and adopters of the FAA did not intend for it to: (1) preempt state law or (2) cover consumer and employment arbitration agreements. This Article responds to those arguments.

Employment Arbitration Agreements Widespread

Employment arbitration agreements are widespread. New York Times op-ed says:

"Sixty million employees in the United States — at places from Buffalo Wild Wings to Facebook to Goldman Sachs — are now bound by mandatory-arbitration agreements, and of those, 25 million are bound by class-action bans."

Supreme Court Enforces Employment Arbitration Agreement Waivers of Class Actions

The Court in EPIC SYSTEMS CORP. v. LEWIS predictably split 5-4 with conservative justices enforcing the class waivers and progressive justices dissenting. 

Russ Bleemer writes:

The long-running controversy involves arbitration provisions that kick in due to class waivers which prohibit employees from joining class processes—litigation or arbitration—in favor of mandatory, predispute, individualized arbitration to resolve disputes with their employers.

...

[Justice] Gorsuch’s [majority] opinion rejects a 2012 National Labor Relations Board administrative [decision] that held that FAA Sec. 2 removed mandatory individual arbitration from FAA application for employee agreements.  The Court’s opinion notes that the reasoning interfered with a fundamental attribute of arbitration.

After rejecting the Sec. 2 argument, Gorsuch dismantled the employees’ other arguments.  He develops the Supreme Court precedent concerning two clashing federal statutes, finding that the National Labor Relations Act, passed in 1935, didn’t override 1925’s FAA to require class or collective actions.

Arbitration for Summer Associates at Law Firms?

The law firm of  Munger, Tolles & Olson required its summer associate employees to sign arbitration agreements -- until opposition mounted on social media, the American Bar Ass'n Journal reports.

Law.com also covered this story.

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

Arbitration of Sex Discrimination Cases

"Comparing the Effects of Judges' Gender and Arbitrators' Gender in Sex Discrimination Cases and Why It Matters" is the title of an article by Professor Pat K. Chew, of the University of Pittsburgh School of Law. 

Prof. Chew's abstract:

Empirical research substantiates that the judges’ gender makes a difference in sex discrimination and sexual harassment court cases. The author’s study of arbitration of sex discrimination cases administered by the American Arbitration Association between 2010 and 2014, however, finds that this judges’ “gender effect” does not occur. Namely, there is no significant difference in the decision-making patterns of female and male arbitrators as indicated by case outcomes.

The author proposes that characteristics of arbitrators, the arbitration process, and arbitration cases all combine to help explain the gender effect differences. Further, she suggests that this analysis reveals concerns about the arbitration process more broadly: do the employers’ advantages as a repeat player, the arbitrators’ competitive pressures, and the arbitrators’ unmonitored discretion in decision-making all combine to explain both the gender effect differences and problematic biases in the arbitration process? 

Supreme Court Hears Case on Class-Action Waivers in Arbitration Agreements

Today's oral arguments in Epic Systems Corp. v. Lewis are analyzed by Amy Howe. And Reuters.

HT to Mark Kantor

The Centrist Case Against Current (Conservative) Arbitration Law

The Centrist Case Against Current (Conservative) Arbitration Law is my article just published in the Florida Law Review. 

In The Politics of Arbitration Law and Centrist Proposals for Reform, published in the Harvard Journal on Legislation, I explained how issues surrounding consumer and other adhesive arbitration agreements became divisive along predictable political lines (progressives vs. conservatives) and proposed an intermediate (or centrist) position to resolve those issues. However, The Politics of Arbitration Law did not argue the case for my proposals. It left those arguments for this Article, which makes the case against current (conservative) arbitration law, and a third article, which will make the case against progressive proposals to reform arbitration law. In other words, this Article stands out from the many other articles critiquing current arbitration law because this Article’s critique comes from a centrist, rather than progressive, perspective. For that reason, this Article’s critique may be more likely than progressive critiques to gain traction with lawmakers. 

I welcome comments directed to ware@ku.edu

NY Times Criticizes Confidentiality of Employment Arbitration

Today's New York Times refers to "the murky world of corporate arbitration, in which serious charges of misconduct are often settled behind closed doors." The case accuses parent of Kay Jewelers "of discriminating against women by denying them equal pay and promotional opportunities. The accusations of sexual harassment are included in statements employees made about pay and promotion disparities, and the accusers have sought to link the accusations to their wages."

University of Kansas Law Professor and arbitration expert Chris Drahozal gave me permission to add his point that "the arbitration rules in the Kay Jewelers arbitration agreement (National Arbitration and Mediation) are unusual in the U.S. In imposing a confidentiality obligation on the parties. By comparison, the AAA and JAMS rules impose a confidentiality obligation only on the arbitrator and the administrator. Under the AAA and JAMS rules, either party remains free to release any information about the arbitration (in the absence of a confidentiality order by the arbitrators) without consent of the other party."

Arbitration of Fox News' Anchor's Sex Harassment Claim?

"Lawyers for the Fox News chairman Roger Ailes filed a motion on Friday arguing that the sexual harassment lawsuit filed against him by a former anchor, Gretchen Carlson, should be moved from" court to arbitration, the New York Times reports.  “Gretchen Carlson had an arbitration clause in her contract, stating that any employment dispute regarding her employment at Fox News must be done via confidential arbitration,” Barry Asen, Mr. Ailes’s lawyer, said in a statement.

NYTimes discusses relationship between confidentiality and employment arbitration.

Circuit Split on Employment Class Waivers

The Seventh Circuit refused to enforce an arbitration agreement’s prohibition on class actions, which would have required the employee to individually arbitrate his wage and hour claim. The Seventh Circuit said the agreement’s prohibition on class actions violated the employee’s right to engage in concerted activity under the National Labor Relations Act.

In so ruling the Seventh Circuit joined the National Labor Relations Board but split from the Fifth Circuit.