A Michigan appellate court recently found that a lawyer’s sexual harassment and assault of a paralegal and receptionist do not relate to employment with the firm. As a result, the paralegal’s and receptionist’s claims did not fall within the scope of the firm’s arbitration clause, which covers disputes related to their employment. The court reasoned that although the assault and harassment would not have happened but-for the plaintiffs’ employment with the firm, these acts are not foreseeable consequences of being employed at the firm. The case is called Smits v. Morse, No. 339972 (Mich. Ct. App. Mar. 14, 2019) (click here for a copy of the decision).
Parts of the opinion appear to rely on the text or scope of the arbitration clause, which is arguably narrow and only covers disputes that relate to the plaintiff’s employment. I often see clauses that are drafted more broadly and cover all disputes between two parties, without any limitations. However, in addition to the language of the arbitration clause, the court also relied on a “strong public policy that no individual should be forced to arbitrate his or her claims of sexual assault.” The court observed “the idea that two parties would knowingly and voluntarily agree to arbitrate a dispute over such an egregious and possibly criminal act is unimaginable.” The court also recognized that arbitration clauses can improperly “perpetuate a culture that silences victims of sexual assault.”
The court’s decision appears to be based on the state’s arbitration statute. The decision carefully avoids explicit references to the Federal Arbitration Act, although the decision does cite cases involving the Federal Arbitration Act.
If one applies the court’s rationale to the text of the FAA, decades of Supreme Court decisions would collapse. The FAA covers disputes that arise out of a contract, but civil rights violations, other statutory claims, and tortious wrongdoing are not foreseeable, expected consequences of entering into a contract with an employer or company. One’s right to sue for such violations is not based on a contract and thus should not be covered by the FAA.