Chipping Away at Arbitration
By Mark Adams
For many employers, arbitration agreements have been a valuable tool for resolving employment disputes. They allow cases to be handled outside the court system without the costs associated with prolonged discovery schedules and complex procedural rules, and, most importantly, without a public record that would allow for public access to those proceedings. All told, arbitration cases are cheaper and faster for all concerned.
Not just employers appreciate the value of arbitration agreements. Congress recognized their benefit when it enacted the Federal Arbitration Act (FAA), recognizing the right of parties to be able to freely enter into contracts to resolve their disagreements. In Moses H. Cone Memorial Hospital v. Mercury Construction Corp., the U.S. Supreme Court stated “as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Title VII claims, Age Discrimination in Employment Act claims, and Fair Labor Standards Act claims are just some of the many forms of disputes that can be compelled to be resolved through an arbitration agreement.
Yet, despite this long-standing national policy, arbitration agreements can have their limits. Some state fair-employment-practice agencies do not recognize their enforcement when it comes to cases that can come within their jurisdiction. For example, when it comes to discrimination claims arising under its Massachusetts General Law Chapter 151B, the Massachusetts Commission Against Discrimination has the wherewithal to move forward with a discrimination complaint on its own accord in the public’s interest.
Now, Congress has passed and President Biden has signed into law the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” to prohibit employers from compelling employees to resolve sexual-harassment and sexual-assault disputes through the use of an pre-dispute arbitration agreement. While the act takes effect immediately and applies to such agreements that exist, it does not apply to cases that are already pending. Rather, the act applies to claims that accrue on or after the law’s enactment.
While the motivations for the law’s passage are fairly clear (the rise of the #MeToo movement and the need for greater awareness on such cases), it does raise the question of whether future legislative initiatives may be forthcoming to create additional carveouts in the interest of workplace transparency. In fact, there is an interim final rule that has been promulgated by the Occupational Safety and Health Administration in implementing procedures for the handling of retaliation complaints under the Taxpayer First Act (TFA), which does exactly that. The rule (which is currently under comment until May 6) states that “no pre-dispute arbitration agreement is valid or enforceable if the agreement requires arbitration of a dispute arising under the TFA anti-retaliation provision.”
That is not to say pre-dispute arbitration agreements are dead. Far from it. After all, they also serve to resolve other disputes that may not have legal consequences at all. However, what may be next? Pay equity and transparency claims? Other forms of federal discrimination? Only time will tell. However, with the growing demand for greater transparency comes the potential for additional erosion of the longstanding policy favoring arbitration agreements in the future.
Mark Adams is director of Compliance at the Employers Assoc. of the NorthEast. This article first appeared at eane.org.