There are no particularly interesting cases to report on today. So, I will take this opportunity to look at the legislation, now sitting on the President’s desk, which would invalidate contract provisions mandating the arbitration of sexual harassment and sexual assault disputes.
One of the good things about a blog is that the author can think aloud, which has both risks and benefits. I want to be clear that all I am doing is raising some issues that crossed my mind late last night. I have not researched them; I will leave that to others who have a client’s interest in the fight. Nor am I expressing a personal opinion as to how courts should resolve those issues. As a working neutral, I rely on counsel to present their arguments in each case, and I decide solely on the evidence and law which they put forward.
The Act
The “Arbitration of Disputes Involving Sexual Assault and Sexual Harassment” Act, HR. 4445, passed the Senate on February 10, 2022, and Congress sent the act to President Biden for signature. The President has previously supported the concept contained in the legislature, so a signature is expected. (The President has had a potential war on his plate to deal with recently).
HR 4445 has three major thrusts. First, the Act defines “sexual assault” and “sexual harassment” disputes broadly, encompassing conduct that, if proven, would violate federal, state or Tribal law. While the Act does not ban the arbitration of such claims, it gives the person alleging qualifying conduct or “the named representative of a class or in a collective action alleging such conduct” to “elect” to invalidate any predispute mandate to arbitrate such claims. Second, the Act provides that the court, not an arbitrator, resolves gateway questions that are now frequently delegated. Specifically, the judge will decide “the applicability of [the Act] to an agreement to arbitrate” and “the validity and enforceability of an agreement to which [the Act] applies.” Third, in a provision that has received less attention in the media, but may be more important in the real world of employment litigation, the Act invalidates “predispute joint-action waiver[s].” Thus, the ubiquitous waiver of collective and class actions contained in employment agreements is now inapplicable to sexual harassment and sexual assault cases. (I suspect that the major firms representing employers are about to go on a litigation lawyer hiring spree).
Is it constitutional?
Can one address the constitutionality of the Act without going back to the bad days of Lochner v. New York, 198 U.S. 45 (1905)(invalidating limitations on working hours as a violation of the Contract Clause)? How will the current Supreme Court, which is perceived as moving to the right, address the issue?
The argument against constitutionality centers on the Constitution’s Contract Clause, which prohibits laws “impairing obligation of contracts.” Over time, courts have developed exceptions to that prohibition, such as laws involving regulated industries, legislation affecting health and welfare, and activities governed by the Commerce Clause. But, does this statute fall within any of those carve-outs? Unlike the Federal Arbitration Act, which covers only cases affecting interstate or foreign commerce, HR 4445 contains no such limitation, nor was it passed as an amendment to the FAA. Since it applies to all private employers, the Act’s coverage is not limited to regulated industries. While sexual harassment and sexual assault certainly are matters which Congress can govern, as it has in Title VII and Title IX legislation, unlike those pieces of legislation this statute does not purport to regulate the actual offensive conduct; rather, it addresses only the means of resolving those issues after the fact? There certainly are fairness concerns in sexual assault arbitration. According to the on-line reporter ”The 19th,” the median recovery in arbitrations regarding sexual harassment is $30,000, while the equivalent figure for litigated cases is $210,000. The American Association for Justice (formerly ATLA) reports that 85% of arbitrators are white and 77% are male – certainly not a representative group. The State Attorneys-General who wrote in support of the bill argued that the confidentiality of arbitrations shrouds the conduct of persistent bad actors. However, none of those issues, except perhaps the confidentiality concerns, would seem to have an impact on preventing the assaultive or harassing behavior. If that assessment is correct, is there sufficient public interest in post-conduct dispute resolution procedures to override the protection of contracts contained in Article I, Section 8, Clause 3 of the Constitution?
As I said above, I have not done the research needed to answer these questions. However, if there is law student somewhere looking for a topic for next year’s law review Note, this is a terrific candidate. There are oodles of issues to noodle on and plenty of precedents to play with.
Judicial issues
The Act only prohibits mandatory arbitration and collective action waivers in sexual assault and sexual harassment cases which “arise[]” or “accrue[]” on or after the date of its enactment. So, where does that leave the court in a typical case? Assume a case arises after the effective date of the Act in plaintiff alleges both sexual harassment and the failure to pay her wages required under the Fair Labor Standards Act. Further, assume that she falls under a mandatory arbitration clause. Certainly, the statute applies to the sexual harassment case. However, what about the wage claim? The Act prohibits mandatory arbitration of “a dispute involving a non-consensual sexual act or sexual contact.” Does the term “dispute” define a case, i.e., everything bearing the same docket number, so that neither the sexual assault claim nor the wage claim may be forced to arbitration? Or does that term refer only to the “disputed” set of legal issues and facts that deal directly with the “sexual act or sexual contact,” in which case the wage claim would still be subject to arbitration? [1]
If the court takes the latter view, how does it manage resolution of the wage claim? Does it stay the harassment litigation pending the arbitration of the wage claim, stay the arbitration pending the litigation, or let both go forward at the same time? One of the objects of arbitration is to reduce discovery. If both cases proceed at the same time or the litigation goes first, the parties could engage in broader discovery under cover of litigation than they would in an arbitration alone, thus potentially lengthening and increasing the cost of the arbitration because there would be more evidence to introduce. On the other hand, litigating first would expose the inflammatory parts of the case to public scrutiny early, thus encouraging settlement of the whole dispute.
A related scenario will be the collective or class action which involves two groups of employees – those who suffered sexual harassment before the Act’s effective date and those whose claims arose or accrued thereafter. (An interesting side issue – when does a continuing course of harassment “accrue?” Is it with the first incident, which may be before the Act’s effective date, or at the time of the last act, which might be after the statute goes into effect)? How does the court manage the two groups of claims – the older claims that would be arbitrable and the newer ones that are not? What if one group is significantly larger than the other? Should the smaller group be tried or arbitrated first, in hopes that those cases can act as bellwethers to guide the settlement of the other tranche? Conversely, do you try the larger group first or simply let both proceed at their own pace? If you let both proceed in tandem, how important is the risk of inconsistent results between the arbitrated and litigated cases?
What is next from Congress? – The scope of the claims subject to this act is fairly narrow. However, will the changes in arbitrability stop here? Why is it any less desirable to publicize a company’s egregious pattern of racial or gender orientation discrimination than its tolerance of sexual harassment? What about claims outside of the employment context? Although the plaintiffs’ bar seems to have adapted to constraints on class arbitrations by bringing hundreds or thousands of individual claims at once, is this really an efficient way for the dispute resolution system to resolve mass product and service claims? In short, where do these legislative concerns stop – and will arbitration remain a way to resolve claims other than those between commercial entities? Stay tuned.
As I said above, these are merely the musings of an arbitration geek, and I have not hit the law books. However, as courts address these and many other issues which the “Arbitration of Disputes Involving Sexual Assault and Sexual Harassment Act” will raise, I am looking forward to reading opinions from good judges who, supported by the arguments of talented counsel, will have thought more deeply about those questions. Stay tuned to “ADR Highlights” for discussion of those developments.
Enjoy the rest of the week.
David A. Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com
[1] An even more complicated case would arise if the plaintiff alleged that the employer withheld part of her wages because she refused to submit to the employer’s sexual demands.
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