For years numerous employers have added arbitration clauses to the pile of paperwork new employees had to sign in order to begin their positions. Often, the documents were not explained in terms of significance or in terms of that condition of employment being negotiable. The Supreme Court has consistently held said agreements to be enforceable under the Federal Arbitration Act (FAA), 9 U.S.C. 1 et seq. The court has also interpreted the application fairly broadly, holding the arbitration clauses enforceable in broad range of cases. Most recently in Epic Systems Corp v. Lewis, 138 S. Ct. 1612 (2018), the Court found the FAA required enforcement in FLSA cases, both individual and class claims. There is some caselaw holding that ambiguities would be strictly enforced against the drafter/employer, but most employers have clarified the language in their agreements at this point, so that this is no longer an issue.
In a major win for employees on this issue, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, on February 10, 2022. The law takes the form of an amendment to the FAA, which makes provisions of arbitration agreements that include cases for sexual harassment and sexual assault invalid and unenforceable. President Biden is expected to sign the law in the near future.
While this is a big first step in limiting the Federal Arbitration Act for employment cases, it will take some time to sort out how it gets treated by the courts. It will not take effect until it is enacted into law, so it will not be applied retroactively. What will happen if an employer does not modify its existing agreement to make the exclusion clear? Does that make the agreement ambiguous and therefore invalid for other causes of action? This will be sorted out by the courts in decisions interpreting the new law.
There are some Plaintiffs who may still prefer arbitration, for a variety of reasons. The most often cited is issues of privacy, and a desire to avoid embarrassment due to the possibility of disclosure of uncomfortable facts. The new law does allow the parties to negotiate and agree to the terms of an arbitration after the agreement and cause of action have accrued. This is significant, because the employee will now have more control over the selection of the arbitrator and the manner in which it will be conducted.
From an objective legal perspective, I believe the employee is always better off pursuing their case with a trial court, but I do recognize certain persons and certain cases may necessitate a more private resolution. That decision will always belong to the client!
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