Circuit Court of Appeals Gives Plaintiffs a Tactical Way Out of Pre-Dispute Arbitration Clauses

In Bruce v. Adams & Reese, LLP, the 6th Circuit Court of Appeals held that a pre-dispute arbitration clause was invalid for an entire case because just one claim in the case involved sexual harassment based on a broad interpretation of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 ("EFAA"). Specifically, EFAA 402(a) provides that "at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute . . . no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute." At issue in this case was the definition of the term "case," and the Circuit Court defined that term as "encompassing a plaintiff's entire suit." Specifically, the Appellate Court held that "where a plaintiff brings multiple claims in a single suit against a party with whom she has an otherwise-valid arbitration agreement, and one of those claims alleges a 'sexual assault dispute' or a 'sexual harassment dispute,' the EFAA renders the arbitration agreement unenforceable with respect to each of the claims that comprise her case." As a result, a Plaintiff seeking to tactically avoid arbitration can plead a sexual harassment claim as well as their core claims to avoid the suit. However, an entity seeking to compel arbitration can counter, by not arguing that the other claims must still be arbitrated, but by arguing that the sexual harassment claim was not alleged under the applicable pleading standard in the first instance and nothing must be arbitrated. Nonetheless, the Appellate Court left "for another day the question of whether the Yost standard (federal pleading standard), the Diaz-Roa standard (Bell v. Hood’s jurisdictional standard), or some other standard represents the correct interpretation of the EFAA" when determining if the sexual harassment claim was properly alleged. There is going to be a lot of litigation coming on this issue because companies are not going to want to give up their pre-dispute arbitration clauses because creative Plaintiff's counsel have tactically negated arbitration obligations by loosely alleging a weak sexual harassment claim. 

Arbitration clauses are no longer bulletproof.

If your company relies on pre-dispute arbitration agreements, or you are challenging one, contact Lieb at Law, P.C. to assess your exposure and strategy now.

Sexual Harassment & Assault Claims can be Brought by victims as Class Actions in Court

Victims of sexual harassment and sexual assault can now proceed in a class action, with other victims, and can also litigate their case in court, individually or collectively, regardless of having previously executed an arbitration agreement. 

This is really important because powerful companies have traditionally forced their employees and independent contractors to sign predispute joint-action waivers, which prevent victims from bringing joint, class, or collective actions against those companies for sexual harassment and sexual assault. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 invalidated such waivers. Now, victims can work collectively and take on powerful companies in court in the same way that a union equalizes employee bargaining power at the proverbial negotiating table.

The Act also invalidates mandatory arbitration agreements, which heavily favor companies who regularly pay the same arbitrators, know their rules, have relationships, and win a vast majority of the time.

To learn more about this new law, here is an audio recording of my appearance on The Jay Oliver Show explaining the importance of the law right after it was passed by the Senate. To be clear, the recording misstates the law's effectiveness to past claims. The law only applies to claims that "arise[] or accrue[] on or after the date of enactment," which was March 2, 2022. 

 

Protections for Victims of Harassment are Effective Today.

The following provisions of the recently passed New York State law which provide additional protections for victims of harassment/discrimination based on any protected class (sex, race, religion, etc.) go into effect today: 

1)  As of today, the high "severe and pervasive" standard for establishing claims of harassment no longer applies. Rather, any conduct, including isolated incidents, that merely rises above "petty slights" or "trivial inconveniences" may be considered harassment.

2) Whether or not an employee filed an internal complaint prior to filing a lawsuit is no longer determinative of an employer's liability.

3) Non-employees (contractors, vendors, etc.) can now bring claims of harassment against companies based on any protected class.

4) Non-disclosure provisions in agreements settling harassment claims are prohibited unless it is the employee's preference.

5) Mandatory arbitration of harassment claims based on any protected class is now prohibited.

Employers should ensure that these new provisions are included in their annual harassment prevention training.