By Linda C. Ashar, J.D.
Faculty Member, Dr. Wallace E. Boston School of Business
On February 10, U.S. Congress passed its final approval on a sexual harassment bill that has been called a #MeToo milestone. Named the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“Act”), this bipartisan bill is of landmark proportion because of its impact on employers’ typical approach to managing sexual harassment claims with the use of mandatory arbitration agreements..
Traditionally, the inclusion of predispute mandatory arbitration clauses in employment contracts kept sexual harassment claims marginalized and under wraps, often providing employees with limited legal remedies as compared to litigation awards. One advantage to employers is the relative privacy of the arbitration process, keeping these claims out of the public record. In no uncertain terms, this new act brings sexual assault and harassment claims out of the dark.
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How Mandatory Arbitration Clauses Work
In employee contracts, employers typically include mandatory private arbitration clauses with acceptance of the arbitration result, foreclosing recourse in the courts. While arbitration has its place as a dispute resolution mechanism, it is not intended to replace the Constitutional judicial system.
Mandatory arbitration under these employment contracts is a secretive process, with results usually confidential. Claimants are not able to discuss their issues outside the case. This limitation has served to undermine the real pervasiveness of sexual abuse in the workplace.
In opposition to the use of mandatory arbitration clauses, Senator Kirsten Gillibrand, co-sponsor of the bill with Senator Lindsay Graham, stated: “This bill is one of the most significant workplace reforms in the last 50 years and is a major step forward toward changing a system that uses secrecy to protect perpetrators and silence survivors.
“The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act will void existing forced arbitration agreements for sexual harassment and sexual assault and end their use. It will give survivors their day in court, allow them to discuss their cases publicly and end the days of institutional protection for harassers.”
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Opponents Argued that Arbitration Reduces Stress on the Court System
The use of mandatory arbitration by employers developed from the federal courts broadly favoring arbitration. In theory, arbitration is an attractive alternative to clogging up the court system.
This argument was emphasized by opponents of the Act. One witness in the House Judiciary Committee stressed the economy and efficiency of arbitration, stating: “Arbitration is a form of dispute resolution that may be voluntarily chosen by the parties to a dispute. The parties agree, usually in advance through a contract, to submit their conflict for a legally binding and enforceable decision by a third party, with the adjudication taking place outside of the court system.
“It thus provides an alternative to having a judge or jury decide the dispute. The proceedings themselves remain adjudicative in nature.”
Several Courts Have Traditionally Ruled in Favor of Mandatory Arbitration
However, the arbitration process should not be a tool to limit access to justice and should not be accepted as nonnegotiable contract provisions necessary for an employee to gain or keep employment. Nevertheless, the courts have traditionally favored mandatory arbitration of employment claims.
A notable case establishing acceptance of predispute mandatory arbitration clauses was Gilmer v. Interstate/Johnson Lane Corp (1991). In this case, the U.S. Supreme Court enforced mandatory arbitration of an employee’s age discrimination claim under the Age Discrimination in Employment Act (ADEA), based on an arbitration clause that the employee no doubt viewed obscure as to a discrimination claim.
Robert Gilmer was a securities representative who had to sign a registration application with the New York Stock Exchange (NYSE) as a requirement of his employment with his employer. This requirement was not negotiable, because it was necessary for Gilmer to comply with NYSE regulations.
That NYSE registration application included a clause that required mandatory arbitration of any claim arising out of a registered representative’s employment or termination of employment. Later, when Mr. Gilmer’s employment was terminated at age 62, he alleged age discrimination and tried to sue his former employer.
The U.S. Supreme Court found no credible reason against the enforcement of mandatory arbitration of Mr. Gilmer’s statutory ADEA claim under the NYSE arbitration provision. The Court also noted, significantly, that Congress “did not explicitly preclude arbitration or other nonjudicial resolution of claims” in the ADEA.
In other words, Congress has to be clear that a claimant has the express right to a judicial remedy. Based on Gilmer, the U.S. Circuit Court for the Sixth Circuit upheld mandatory arbitration for an employment-related discrimination claim under Title VII of the Civil Rights Act later that same year.
Ironically, Congress made clear in the Civil Rights Act of 1991 that a jury trial was a right for discrimination claimants. However, Congress also included this Note in the statute: “When appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including. . . arbitration, is encouraged to resolve disputes arising under the Acts or provisions of federal law amended by this title.” While not an express endorsement of predispute arbitration clauses, the Note offered ambiguity of Congressional intent where such clauses were endorsed by the Courts.
Rojas v. TK Communications, Inc. (1996), provides an example of a sexual harassment case in which the federal courts upheld mandatory arbitration. Camille Rojas, a disc jockey at KXTN radio station in San Antonio, Texas, claimed sexual harassment by her supervisor and retaliation by the employer. Her employment agreement contained the following provision:
“23. Arbitration Except for breaches or threatened breaches of the provisions of Paragraphs 15 through 18 relating to equitable relief, any action contesting the validity of this Agreement, the enforcement of its financial terms, or other disputes shall be submitted to arbitration pursuant to the American Arbitration Association in Ft. Lauderdale, Florida.”
Ms. Rojas sued her employer, TK Communications, Inc., for sexual harassment and retaliation in federal court. The U.S. Court of Appeals for the Fifth Circuit upheld the predispute mandatory arbitration clause based on the “other disputes” language and dismissed her case.
In a 2018 case, the U.S. Supreme Court held in Epic Systems Corp. v. Lewis that individual arbitration clauses in employment agreements lawfully prohibited employees from joining in collective arbitration for their claims against employers. This case was about wage and hour claims, but the Supreme Court’s ruling sheds light on Congress’ nullification of “predispute joint action waivers” in the sexual assault and sexual harassment bill.
Because of these cases, employers established a practice of including predispute mandatory arbitration in employment agreements. This process saves money and keeps cases private. As a result, sexual assault and sexual harassment claimants have been excluded from judicial remedies.
The Key Issue of Mandatory Arbitration Involves Its Predispute Aspect
The key issue to these mandatory arbitration provisions used in employment contracts is the “predispute” aspect of their application. Furthermore, these contracts are coercive because they are required as a condition of employment, meaning they must be accepted to obtain or keep a job.
Essentially, the employee is saying, “I agree that if assaulted or harassed as your employee, I give up my right to sue. I can only go through the arbitration process, even though I don’t know what the facts are now.”
Congress defines this type of agreement in the Act: “The term ‘predispute arbitration agreement’ means any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement.” The Act further states that no predispute arbitration agreement is valid or enforceable “with respect to a case which is filed under Federal, Tribal, or State law” relating to a dispute involving sexual assault or sexual harassment.
The Arbitration Process Favors Companies
Although it might be intended to be equitable in theory, private arbitration in practice favors companies. A 2018 report of the Economic Policy Institute indicates a finding that mandatory arbitration has a “tendency to suppress claims,” and that attorneys are reluctant to take on these cases because of the typically smaller awards that are possible as compared to jury trials. Furthermore, the process of discovery and presenting evidence is less rigorous in arbitration than under court rules and can make obtaining evidence from the company more difficult.
What the New Act Will Mean for the Future
The implications of the Act are far-reaching. First, contracts containing these mandatory arbitration clauses are not enforceable in regard to sexual assault and sexual harassment claims. Ideally, businesses should remove the mandatory arbitration clause from employment and other types of contracts, or the clause should at least be amended to expressly make clear that sexual assault and sexual harassment claims are excluded from mandatory arbitration.
Second, the new Act does not preclude arbitration as a litigation alternative in all cases. Its purpose is to prevent predispute mandatory agreement to arbitration for sexual assault and sexual harassment.
After a claim arises, for instance, a claimant is free to choose alternative dispute resolution options. In this Act, Congress has overruled denial of access to the courts. Further, the Act does not apply to other types of claims.
In the near future, President Biden is expected to sign this bill. He has already moved forward with other measures to prevent sexual harassment, including his Executive Order designating sexual harassment a military crime in the U.S. military judicial code. That executive order is pursuant to the National Defense Authorization Act, which the President signed in December 2021.
Mainstream Recognition of Sexual Abuse in the Workplace Is Increasing
The Act and other measures of the federal government signify a sea change in social attitudes toward sexual abuse in the workplace. The Act was overwhelmingly supported by a bipartisan Congress. The recognition of the need to bring access for these claims to the courts is supported by lobbying of groups like #MeToo.
In 2017, Ginnie Graham wrote of the start of #MeToo in Tulsa World, and why it is significant. “Sexual harassment has been happening as a cultural way of life for far too long by people of every political party, religious conviction and place of residence.”
Sexual assault and sexual harassment are not just a women’s issue. Men are victims. All gender identifiers are victims. With the support of Congress and the President, now is time for everyone to recognize the seriousness of these issues.
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