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March, 2022

New Fed Arbitration Ban Warrants Employers Redouble Measures to Prevent Workplace Harassment

By Tracey I. Levy

In the aftermath of #MeToo, state legislatures across the country adopted a range of new employment law protections, typically focused around four objectives:

  • advising employees of their legal rights and obligations and how to raise concerns;
  • expanding the scope and remedies under existing laws;
  • lifting the cloak of secrecy around sexual harassment and sexual assault allegations; and
  • ensuring employees can pursue legal claims in a public judicial forum.

A new federal law, which took effect March 3, 2002, addresses the fourth objective by prohibiting forced arbitration of sexual harassment and sexual assault claims.  The new federal law raises the stakes for employers and warrants revisiting existing measures to prevent incidents of offensive sexual conduct in the workplace.

Advising Employees of Their Legal Rights

New York woke up after #MeToo and has since been at the forefront of the effort to educate employees on the prevention of sexual harassment.  The state mandated both that employers adopt sexual harassment prevention policies that include an array of specific provisions, including a written complaint form, and that they conduct annual sexual harassment prevention training for all employees.  Other states, like California and Connecticut, which had existing harassment prevention training mandates for supervisors, imposed new training requirements applicable to all employees.  And some states imposed requirements only for particular industries.  For example, Illinois targeted restaurants and bars with a requirement to have a written sexual harassment prevention policy with specific provisions, while Washington state mandates sexual harassment prevention training for businesses that employ janitors, security guards, hotel housekeepers, or room service attendants.

Expanding Legal Remedies

New York also was one of the first states to respond by expanding the application of its law against sexual harassment – to every employer in the state, and by including independent contractors within its definition of “employees.”  The initially laws myopically applied only to claims of sexual harassment but were subsequently expanded to include all other protected characteristics.  New York also legislatively defined harassment more broadly than most – to cover any situation in which an employee is subject to “inferior terms, conditions or privileges of employment” based on a protected characteristic, without need to prove that the behavior was severe or pervasive.  Other states have made similar changes, including California, Connecticut, Delaware, Illinois, Maryland, and Vermont.

Lifting the Cloak of Secrecy

California, New Jersey, New York and Tennessee were among the states to adopt measures restricting employers from imposing nondisclosure or confidentiality requirements in the context of settlements of sexual harassment or sexual assault claims.  Illinois, Maryland and Vermont have gone a step further, by additionally mandating that employers periodically report certain data on sexual harassment complaints to a state government agency.  Congress similarly sought to limit nondisclosure agreements by amending the tax code in December 2017 to prohibit employers from claiming a deduction for any settlement payment or attorney’s fees related to sexual harassment or abuse if the settlement was subject to a nondisclosure agreement.

Preserving the Ability to Sue in Court

Most of the same states that invalidated nondisclosure or confidentiality requirements also declared invalid any pre-dispute arbitration clause applicable to a sexual harassment claim.  Those efforts have been stymied, however, because employers generally have been successful in arguing that the state laws are preempted by the Federal Arbitration Act.

Where the New Federal Law Fits In

The new federal law on arbitration of sexual harassment and sexual assault claims avoids the problem the states have faced because it falls outside the scope of the Federal Arbitration Act.  The law also is notably different in scope and import because it:

  • applies to all existing and future pre-dispute arbitration agreements throughout the country;
  • applies to all existing and future class action waiver clauses throughout the country; and
  • grants the party asserting a claim for sexual harassment or sexual assault (whether under federal, state or tribal law) the sole discretion to elect whether to proceed through arbitration or in court, and whether to pursue the claim as a class or collective action.

Senator Lindsey Graham, one of the bill’s sponsors, has been quoted as remarking that the new law will force corporate America to “up their game” and adopt new practices.

Employer Actions in a Higher Stakes Environment

Employers looking to decipher what that could mean should start with a two-fold assessment.  First, ensure that you are complying, in all your workplace locations, with the most recent state and local laws regarding harassment prevention.  In particular, confirm that your policies are current, your agreements are compliant, and that you are timely meeting all training requirements.

Second, consider the four objectives that have driven the state legislative responses.  What initiatives might you want to adopt in your workplace to enhance a culture of respect and ensure employees feel comfortable raising concerns?  Are you conducting harassment prevention training at periodic intervals?  Is your harassment prevention training program merely a check-the-compliance-box exercise, or has it been structured, scheduled and promoted to invite heightened awareness and genuine reflection?  Where still legally permissible, what are the upsides and downsides of maintaining confidentiality and nondisclosure agreements, and are they the best approach for your organization at this time of greater transparency?

No employer is immune from complaints of unlawful harassment.  But our experience has been that actions taken by employers to create and sustain a respectful workplace culture can substantially mitigate that risk and create a more productive workplace environment.

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