In that vein, many employers require their employees to agree to arbitrate employment-related legal claims rather than pursue them in court. This is for a host of reasons, including that arbitration can be, and often is, mutually beneficial, allowing parties to resolve claims efficiently and privately. However, in response to vocal public criticism of arbitration agreements, a growing number of federal and state legislators are working to curb their use, particularly in the context of sexual misconduct.
This article will discuss the federal and state legal landscapes with respect to the use of arbitration agreements in the workplace, and where we may be headed in the future on that front.
Current federal landscape
Employment-related arbitration agreements have, under the Federal Arbitration Act (FAA), long been considered generally enforceable. Adopted in 1925, the FAA directs courts to enforce arbitration agreements according to their terms. (9 U.S.C. § 2, 4). The U.S. Supreme Court has repeatedly ruled that the FAA establishes “a liberal policy favoring arbitration agreements.” (Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).
In 2001, therefore, the Supreme Court confirmed that agreements to arbitrate employment-related disputes between employers and employees are generally enforceable under the FAA. (Circuit City Stores v. Adams, 523 U.S. 105 (2001)). More recently, the Court held that employment agreements requiring individual rather than collective arbitration are enforceable and do not run afoul of employees’ right to engage in protected concerted activity under the National Labor Relations Act (NLRA). (Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018)).
Following Epic, the National Labor Relations Board (NLRB) clarified that, despite the enforceability of collective action waivers, it would continue to strike down arbitration agreements which interfered with employees’ rights to access and file charges with the NLRB. (See Prime Healthcare Paradise Valley, LLC, 368 NLRB No. 10 (2019)). The Board has, however, since assured employers that savings clauses, which remind employees of their NLRA rights, are sufficient to render an arbitration agreement lawful. (Anderson Enterprises, Inc. d/b/a Royal Motor Sales, 369 NLRB No. 70 (2020)).
That said, public sentiment toward mandatory arbitration clauses in employment contracts has soured in recent years. This is in part due to the perceived use of arbitration clauses to keep workplace sexual misconduct disputes confidential.
The federal government took notice of this change in public discourse. On March 3, 2022, President Joe Biden signed the bipartisan Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, thereby barring the enforcement of mandatory arbitration clauses for claims involving sexual misconduct. Specifically, the Act provides that an employee alleging sexual harassment or assault, whether individually or as a class representative, may pursue their claims in court rather than arbitration, regardless of whether they agreed with their employer to arbitrate their claims.
Additional provisions include that a court (rather than an arbitrator) will decide whether the Act applies, and that the Act applies to any dispute or claim arising on or after March 3, 2022. The Act is also retroactive, meaning such clauses are also void in existing contracts.
This article was originally published by Reuters Legal News. To read the full article, download the PDF below.
