Prior bills have attempted, unsuccessfully, to eliminate individual arbitration as a means to resolve employment disputes. Senator Al Franken introduced several bills, starting in 2009, to forbid pre-dispute mandatory arbitration agreements in the employment sector. Now, a new bill has emerged from the current wave of sexual harassment allegations that purportedly would invalidate the use of mandatory arbitration agreements to resolve disputes involving sexual harassment and sex discrimination claims, but the bill itself is fraught with problems.
On December 6, Senator Kirsten Gillibrand (D-N.Y.) and Representative Cheri Bustos (D-Ill.) introduced a bill known as the “Ending Forced Arbitration of Sexual Harassment Act”, which would prevent employers from using arbitration as a means to resolve “sex discrimination disputes.” Republican co-sponsors of the bill include Sen. Lindsey Graham (R-S.C.) and Reps. Walter Jones (R-N.C.) and Elise Stefanik (R-N.Y.).
Senators Gillibrand and Graham participated in a media event supporting the new bill along with Reps. Bustos, Stefanik, Jones and Pramila Jayapal (D.-Wash.). Former Fox News host Gretchen Carlson was also present. Senator Graham reportedly urged the business community to support the bill and to “lead America to a better business environment . . . .” Ms. Carlson, who had sued former network boss Roger Ailes for destroying her career, claimed that somehow “[f]orced arbitration is the harasser’s best friend.”
While apparently a direct response to the many reports of sexual harassment in the movie, television and entertainment industries as well as in Congress, the current bill could cut a far broader swath. This is true for two reasons. First, Section 1 of the Federal Arbitration Act (FAA) contains an exception from its mandate for the enforcement of arbitration agreements for employees in interstate commerce. But, the bill as written could be read to strike language from Section 1 so that it would be inapplicable to contracts of employment – reading “nothing herein contained shall apply to contracts of employment.”
Second, even if the bill was not intended to wipe out all arbitration of employment disputes, it does have other problematic language. It defines a “sex discrimination dispute” as a “dispute between an employer and employee arising out of conduct that would form the basis of a claim based on sex under title VII . . . regardless of whether a violation of title VII is alleged.” The bill continues that no predispute arbitration agreement is “valid or enforceable if it requires arbitration of a sex discrimination dispute.” So, any dispute alleging a gender discrimination claim would be exempt from an arbitration agreement (such as those involving claims of discrimination in compensation or promotion) not just those involving allegations of sexual harassment or sexual assault.
The proposed law’s application to an arbitration agreement and the “validity and enforceability” of an agreement is to be determined under federal law by a court instead of 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.”
Collective bargaining agreements involving an employer and a labor organization are exempt from the proposed law, but no arbitration provision in a labor contract “shall have the effect of waiving the right of an employee to seek judicial enforcement of a right”, under the federal or a state constitution or under a state or federal statute or a public policy based upon the legislation. The bill does not address how this proposed legislation would affect Supreme Court jurisprudence on the proper application of collective bargaining agreements to employment disputes. See, for example, 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009), which held that a provision in a collective bargaining agreement that plainly requires union members to arbitrate employment discrimination claims is enforceable under federal law.
Given its potential scope, the bill could invalidate significant portions, if not all, of the type of arbitration agreements with class action waivers now being considered by the U.S. Supreme Court, regardless of the high court’s ultimate ruling. See Epic Systems Corp. v. Lewis, No. 16-285, Ernst & Young LLP v. Morris, No. 16-300, and NLRB v. Murphy Oil USA No. 16-307. For a description of the three pending cases, see our blog posts from January 17 and June 1, 2017.
Indeed, even if its impact is limited only to sex discrimination disputes, it could be broad. Recent Equal Employment Opportunity Commission (EEOC) charge statistics indicate for fiscal year 2016 that 26,934 charges involving sex discrimination were filed which equal almost 30 percent of the Agency’s total charges. And no data suggests that more court or class actions will lessen incidents of harassment more effectively than increased training and enhanced reporting procedures. One motivation for the bill appears to be an attempt to shine the light of publicity on high profile alleged abusers.
Bottom line: While it is much too early to determine what traction the new bill may gain in Congress, it is clear that the bill would dramatically increase litigation in courts, which did not more quickly or effectively resolve claims of harassment before the advent of mandatory arbitration agreements in the late 1990’s.