Seyfarth Synopsis: Pending bi-partisan legislation aimed at preventing employers from enforcing arbitration agreements of sexual harassment claims might make employers unable to enforce arbitration agreements, and class waivers included in them, as to any employment claim.
High profile stories of sexual harassment (and much worse) in the workplace and beyond have dominated headlines in recent months. Yesterday Time magazine recognized The Silence Breakers – women who have gone public with allegations of sexual harassment and sexual assault – as the 2017 “Person of the Year,” thus becoming the latest to criticize companies and other employers who keep sexual harassment allegations and settlements secret through arbitration agreements with their employees.
Congress is now stepping in with a bill titled the “Ending Forced Arbitration of Sexual Harassment Act” that would amend the Federal Arbitration Act (FAA) by making the FAA inapplicable to claims of sex discrimination. Without the FAA available to enforce an arbitration agreement, an employer likely would be unable to compel a claim of sex discrimination into arbitration and thus would have to litigate sex discrimination claims publicly in federal or state court.
The bill already has attracted bipartisan support. At a press conference to announce the bill, former Fox News anchor Gretchen Carlson shared the stage with Democrats and Republicans from both houses of Congress. In the House, its early co-sponsors include two Republicans. In the Senate, the six original co-sponsors include two Republicans, Lisa Murkowski of Alaska and Lindsey Graham of South Carolina, the latter of whom said at the press conference that his goal is to create a better business environment where women are “able to go to work without having to put up with a bunch of crap.”
That is a goal that any employer can support, but the bill would do far more than that. Under the version pending in the House (the version in the Senate has not yet been posted), there exists a so-called “technical and conforming amendment” that is anything but that.
Currently, Section 1 of the FAA contains an exclusion from its mandate to enforce arbitration agreements for employees involved in transportation. The bill, however, would strike certain limiting language from Section 1 of the FAA so that Section 1 simply would read as follows: “nothing herein contained shall apply to contracts of employment.”
This language likely would mean that employers would not be able to enforce arbitration agreements with their employees. It would not matter whether the agreement is optional or a condition of employment. It would not matter whether the arbitration program contained a waiver of the ability to bring a class or collective action. Under this bill, the FAA arguably no longer could be used as the vehicle to enforce any arbitration agreement in the employment context. And while there may be other vehicles through which to enforce an arbitration agreement (for, example state arbitration acts), the FAA has provided the foundation for recent jurisprudence allowing for enforcement of arbitration agreements, most notably class and collective action waivers, including the ones currently at issue before the U.S. Supreme Court.
It is unlikely that this is Congress’ intent, at least within the Republican majority. And while the bill as a whole has received media attention today, none of that has focused on or even mentioned the broader limit the bill would place on arbitration agreement.
Given recent media coverage about sexual harassment, prominent stories about efforts to use private agreements to thwart complaints about harassment, and early Republican support for this bill, this bill appears it has a real chance of becoming law. Congress should remove the amendment to Section 1 of the FAA before passing it. Otherwise, it threatens to greatly limit the ability of companies and their employees to agree to arbitrate employment disputes on an individual basis.