The Senate, with bipartisan support, just passed a bill invalidating predispute arbitration agreements with respect to sexual harassment and sexual assault claims. The House of Representatives passed the bill earlier this week, and President Biden is expected to sign the bill. The bill is titled “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act.” As explained below, I believe there will be litigation about the language of this soon-to-be law.
These bills are a much-needed reform and partially correct prior errors from the Supreme Court. (The Federal Arbitration Act was never intended to apply to employment disputes or civil rights disputes.) Arguably, these bills are the most significant legislative change in arbitration law in the past few decades.
The #MeToo movement helped expose the need for this change. Arbitration can be an efficient, quick means to resolve appropriate disputes, but arbitration can also be abused to suppress claims and conceal wrongdoing. Because of confidentiality and limited discovery in arbitration, a worker stuck in arbitration may be unable to speak to or collect evidence from other co-workers. As a result, it can be difficult to prove a pattern of misconduct or a hostile work environment, and arbitration in effect can mask or conceal wrongdoing.
I hope additional reforms to arbitration law will occur in the future. For example, there should be a similar reform for arbitration agreements with respect to racial discrimination, or more broadly, for all civil rights claims. (On this issue of race and arbitration, I recently published an op-ed with the Chicago Tribune about the class action lawsuit filed by a former coach against the NFL for racial discrimination.)
Although the bills passed this week by the Senate and House are much needed, I do have some concerns about the language of the bills. I believe there could be confusion and litigation when the new law goes into effect.
The new law would read, in part, as follows:
“[N]o predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.”
Suppose that a worker, who signed a broad arbitration clause, files a lawsuit in court for sexual harassment, but the lawsuit also includes other related claims. For example, the lawsuit may include other gender discrimination claims, such as the employer refused to promote the worker or paid the worker less because of the worker’s gender. Suppose the lawsuit includes not only such gender discrimination claims about promotion and salary, but also includes claims regarding other forms of discrimination, such as racial discrimination.
Literally, the statute declares that an arbitration agreement is not valid “with respect to a case,” as opposed to a narrow claim. Some may argue that the worker’s arbitration clause in the above example is not valid at all with respect to the entire “case,” and so all the claims would remain in court. However, one may counter-argue that the purpose of the law was to prevent forced arbitration of only two types of claims, sexual harassment and sexual assault claims as defined by the statute. Thus, only the sexual harassment claims or sexual assault claims would remain in court, while the claims involving promotion, salary, and racial discrimination would go to arbitration. I’m not sure if members of Congress desired a broader reading or a narrower reading of the law. But if a narrower meaning was intended, the statute could have been drafted differently to say something like: “[N]o predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to claims of sexual assault or sexual harassment.” Unfortunately, when the law goes into effect, I believe courts will be called upon to address this potential ambiguity in the statute, and there could be conflicting court decisions down the road regarding the meaning of the statute.
Even though I am strongly in favor of the arbitration bills passed this week (and I wish the bills were broader in scope and covered all forms of discrimination, all workplace disputes, and all civil rights disputes), I also have a question about the constitutionality of these amendments.
About ten years ago, I wrote an article about one of the earlier iterations of the Arbitration Fairness Acts, which would have invalidated pre-dispute arbitration agreements with respect to a broader variety of claims, such as employment claims, civil rights claims, and antitrust claims. In the article, I explored how such an amendment to the FAA would interact with the Supreme Court’s landmark ruling in Southland v. Keating (1984), where the Supreme Court held that the FAA governs in state court. I believe Southland is a deeply-flawed decision on many levels. But when Congress passed the bills this week, Congress presumably is treating Southland as good law, and just like states have to abide by the FAA today, it seems that states would also have to abide by these new amendments to the FAA.
But think about this week’s amendments in terms of Southland’s validity: states may have their own common law tort claims or statutory claims addressing assault, and the amendments passed this week are in effect telling the states how they must handle these state-created rights. For the same reasons I believe Southland is unconstitutional, it could be argued that the bills enacted this week would be unconstitutional as applied to the states. Congress does not have the broad power to declare state procedures (unless maybe through an ancillary “necessary and proper” power, but what is the valid primary power here?). In other words, if a state legislature believes that such state assault claims could be heard in private arbitration pursuant to a pre-dispute arbitration agreement (or if the state believes such claims must be heard in a state administrative tribunal or state agency, like in Preston v. Ferrer, which I believe is also an unconstitutional, flawed decision), can Congress step in and declare that such state-created rights must always be heard in a state court? Put another way, Congress is telling states that their state courts must remain open to hear state-created rights. But I don’t think Congress has such broad powers to regulate procedure in the state courts.
To justify the amendments this week, it seems that Congress instead would have to rely on an expansive reading of the Commerce Clause, which I believe could be arguable or debatable. Although I fully agree with the dire need to address harassment and assault, and I fully support the goals of Congress here (and wish the bills were actually broader in scope), can Congress rely on the Commerce Clause to regulate how a state-created right should be enforced? Can dispute resolution about an assault be considered economic activity which can be regulated by the Commerce Clause? See US v. Morrison (2000). These issues remind me of the federal moratorium on evictions/landlord-tenant disputes during the pandemic (or fill in the blank with any other state-created right). Even though the intent behind such federal regulations or laws may be good, I question whether Congress or the federal government can dictate how disputes about state-created rights are to be resolved at the state level.