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.”

 

California Supreme Court Vacates Arbitration Award and Refuses to Enforce Arbitration Clause in Void Contract

The California Supreme Court held that a law firm’s failure to disclose to the firm’s client the firm’s conflict of interest violated Rules of Professional Conduct and thus rendered the firm’s engagement agreement with its client, including the arbitration clause, unenforceable in its entirety.

This decision is interesting for:

1. applying state arbitration law rather than the Federal Arbitration Act;
2. vacating an arbitration award on the merits; and
3. not applying the separability doctrine of Prima Paint v. Flood & Conklin (1967) 388 U.S. 395.

On the first of these topics, the court said: “the parties’ agreement calls for application of California law, including the CAA, and both parties agree that the CAA governs. This case thus presents no question concerning application of the Federal Arbitration Act, 9 United States Code section 1 et seq. (See Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468, 470; Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 387.)”

On the second, the court said: a court may vacate an arbitration award when “[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the

decision upon the controversy submitted.” (Code Civ. Proc., § 1286.2, subd. (a)(4) (section 1286.2(a)(4)).) And: “the merits of an arbitral award are not generally subject to judicial review, but ... “the rules which give finality to the arbitrator’s determination of ordinary questions of fact or of law are inapplicable where the issue of illegality of the entire transaction is raised in a proceeding for the enforcement of the arbitrator’s award.”

Law 360 discusses the case

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

The Politics of Arbitration Law and Centrist Proposals for Reform

My latest article, The Politics of Arbitration Law and Centrist Proposals for Reform, is in the Harvard Journal on Legislation. Stephen J. Ware, The Politics of Arbitration Law and Centrist Proposals for Reform, 53 Harvard J. on Legislation 711 (2016).

The abstract:

Arbitration law in the United States is far more controversial when applied
to individuals than to businesses. While enforcement of arbitration agreements
between businesses sometimes raises legal issues that divide courts, those issues
tend to interest only scholars, lawyers, and other specialists in the field of arbitration.
In contrast, enforcement of arbitration agreements between a business
and an individual (such as a consumer or employee) raises legal issues that
interest many members of Congress and various interest groups, all of whom
have taken positions on significant proposals for law reform. The Consumer
Financial Protection Bureau has extensively researched and reported on consumer
arbitration agreements and is expected to issue a rule regulating, or even
prohibiting, such agreements.

This Article both explains how issues surrounding consumer and other adhesive
arbitration agreements became divisive along predictable political lines
and introduces a framework to understand and compare various positions on
them. This new framework arrays on a continuum five positions on the level of
consent the law should require before enforcing an arbitration agreement
against an individual. Progressives generally would require higher levels of
consent than arbitration law currently requires, while conservatives generally
defend current arbitration law’s low standards of consent.

This Article proposes a centrist position. It joins progressives in rejecting
overbroad enforcement of adhesive arbitration agreements due to conservative supported
anomalies in arbitration law’s treatment of contract-law defenses, legally-
erroneous decisions, and class actions. Once these anomalies are fixed,
though, this Article joins conservatives in defending general enforcement of adhesive
arbitration agreements under contract law’s standards of consent because
adhesive arbitration agreements should—contrary to progressive opinions—be
as generally enforceable as other adhesion contracts. This Article briefly concludes
by proposing language for a rule the Consumer Financial Protection Bureau
could adopt to enact the reforms advocated in this Article.

The Politics of Arbitration Law and Centrist Proposals for Reform

The Politics of Arbitration Law and Centrist Proposals for Reform is a new paper of mine, just posted. I welcome comments and suggestions to ware@ku.edu

The abstract:

Arbitration law in the United States is far more controversial when applied to individuals than to businesses. While enforcement of arbitration agreements between businesses sometimes raises legal issues that divide courts, those issues tend to interest only scholars, lawyers, and other specialists in the field of arbitration. In contrast, enforcement of arbitration agreements between a business and an individual (such as a consumer or employee) raises legal issues that interest many members of Congress and various interest groups — all of whom have taken positions on significant proposals for law reform. The Consumer Financial Protection Bureau has extensively researched and reported on consumer arbitration agreements and is expected to issue a rule regulating, or even prohibiting, such agreements.

This Article both explains how issues surrounding consumer and other adhesive arbitration agreements became divisive along predictable political lines and introduces a framework to understand and compare various positions on them. This new framework arrays on a continuum five positions on the level of consent the law should require before enforcing an arbitration agreement against an individual. Progressives generally would require higher levels of consent than arbitration law currently requires, while conservatives generally defend current arbitration law’s low standards of consent.

This Article proposes an intermediate (or centrist) position. It joins progressives in rejecting conservative-supported anomalies that enforce adhesive arbitration agreements more broadly than other adhesion contracts on the three important topics: contract-law defenses, correcting legally-erroneous decisions, and class actions. Once these anomalies are fixed though, adhesive arbitration agreements should — contrary to progressives — be as generally enforceable as other adhesion contracts. In other words, this Article joins conservatives in defending general enforcement of adhesive arbitration agreements under contract law’s standards of consent. The Article briefly concludes with the language of a rule the CFPB could adopt to enact into law the reforms advocated in this Article

Arbitration Law's Separability Doctrine After Buckeye Check Cashing, Inc. v. Cardegna

Arbitration Law's Separability Doctrine After Buckeye Check Cashing, Inc. v. Cardegna

This article analyzes the Supreme Court cases of Buckeye Check Cashing, Inc. v. Cardegna, and Prima Paint Corp. v. Flood & Conklin Manufacturing Co.  It discuss the separability issues they leave unresolved. Finally, this Article critiques the separability doctrine and calls for its repeal by Congress.

Employment Arbitration and Voluntary Consent

Ware, Stephen J., Employment Arbitration and Voluntary Consent. Hofstra Law Review, Vol. 25, No. 83, 1996. Available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=10318