NYS Judge Allow Sexual Harassment Claim with Mandatory Arbitration Clause to Process in Court

In a recent sexual harassment case that involved an employee who entered into a mandatory arbitration agreement to arbitrate all discrimination/retaliation claims, a New York State Judge ruled that the agreement to arbitrate the sexual harassment claims was unenforceable pursuant to the 2018 amendments to Article 15 of the Executive Law, The New York State Human Rights Law (“NYSHRL”).

In 2019 a judge upheld the enforceability of such an agreement, which means this recent decision now creates a split in authority.

Mandatory Arbitration Agreements for Employees 

The NYSHRL prohibits employment discrimination on the basis of:

• Age
• Race
• Creed
• Color
• National origin
• Sexual orientation
• Military status
• Sex
• Marital status
• Disability

In New York, an employer was permitted to have employees enter into a mandatory arbitration agreement where the employee agrees to arbitrate any and all employment-related claims. This means that such an employee could never get to a jury. Now, these mandatory arbitration agreements are unenforceable. 

In the wake of the 2018 #MeToo movement, New York State Legislature enacted a new section of t article 75 to prohibit employers from requiring that employees arbitrate sexual harassment claims. In 2019, that prohibition expanded to all acts of discrimination/retaliation and not just sexual harassment. 

Understanding the Case

The plaintiff in this case had executed an employment agreement in 2014. This agreement dictated that arbitration would govern any disputes concerning her employment which would include any discrimination disputes she had against her employer. 

After the amended to the law that occurred in 2018 her company issued a new policy in November of that same year. This policy now stated, “that an individual complaining of harassment/discrimination could file a complaint in state court as one of several methods of bringing a claim.”

The employee filed a state court lawsuit in April 2019 that contained sexual harassment claims, along with other claims. In response, the defendant (her employer) moved to compel arbitration citing the FAA preemption.

The Court, however, rejected the defendant’s motion to compel arbitration stating that New York State Law, not the FAA, applied in this matter as the alleged sexual discrimination occurred only in the company’s New York offices. The Court also ruled that the law applies retroactively to invalidate older agreements.

This decision created a decisional split, as a different New York trial court judge ruled in a case in February 2020 that the arbitration clause prohibition should not be applied retroactively.

What You Need to Know as an Employer

It’s important to note that the company involved in this case has filed a notice of appeal and decisions from federal and/or state courts may have different outcomes. However, if this decision stands, employers will now face uncertainty regarding whether or not mandatory arbitration provisions discrimination/retaliation claims will be enforceable in New York. 

This means employers should consult with their attorney or legal counsel to determine whether arbitration provisions make sense from a business perspective. It is important that you understand what this means for your company and how it can affect you especially since the Court ruled that the law applies retroactively to invalidate older agreements.

What You Need to Know as an Employee

It’s important to understand that if you sign an employment contract or agreement with a forced arbitration clause, you are essentially waiving your legal right to sue the company in a public court of law over a dispute—regardless of the severity of the situation or violation. As an employee, you should know your rights and what to do if you find yourself in a situation where arbitration is being forced. 

If you have experienced any form of discrimination in the workplace, contact us today.