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Major Technology Companies No Longer Require Arbitration in Sexual Harassment Cases

Litigation is perhaps the most well-known method of dealing with legal disputes, but it is not the only method. Our legal system increasingly encourages would-be litigants to use alternative dispute resolution (ADR) before, or instead of, going to court. Many contracts now include clauses requiring the parties to submit disputes to arbitration. While arbitration may offer some benefits over the court system, it is subject to numerous criticisms in disputes involving a significant imbalance of power and resources. If you have questions of this nature, contact a New Jersey employment attorney without delay.

Court decisions interpreting New Jersey’s employment antidiscrimination statute have invalidated provisions of arbitration agreements that infringe on statutory rights. Federal law, on the other hand, favors arbitration over litigation in most cases. Several major technology companies, employing thousands of people, recently dropped mandatory arbitration of sexual harassment claims, which may allow more claims to see the light of day.

Statutes like Title VII of the federal Civil Rights Act of 1964 and the New Jersey Law Against Discrimination (NJLAD) prohibit discrimination in employment on the basis of sex, and include sexual harassment as a form of unlawful sex discrimination. In order to assert a claim under these statutes, an individual must first file a complaint with a state or federal agency like the Equal Employment Opportunity Commission (EEOC). The agency will investigate the claim, and if it determines the claim to have merit, it will issue a “right to sue” letter. This allows the complainant to file suit in state or federal court. Arbitration clauses in employment contracts prevent employees from accessing this process.

Congress has demonstrated a strong preference for arbitration over litigation. The Federal Arbitration Act (FAA) of 1925 states that, as long as they are part of a valid and enforceable contract, arbitration clauses are “valid, irrevocable, and enforceable.” 9 U.S.C. § 2. If a party to an arbitration agreement files a lawsuit against the other party, the FAA states that the court must stay all proceedings upon request of that party. The statute gives courts the authority to confirm arbitration awards, and only very limited authority to vacate or modify them. A court may only vacate an arbitration award in cases involving “corruption, fraud, or undue means,” “misconduct” by the arbitrators, or proof that an arbitrator “exceeded their powers.” Id. at § 10.

New Jersey courts have largely upheld the enforceability of arbitration agreements, but they also tend to examine them closely to make sure they do not infringe on employees’ rights under the NJLAD. A recent decision by the New Jersey Appellate Division, for example, found that an arbitration clause’s “provision barring recovery of punitive and exemplary damages is unenforceable and void.” Roman v. Bergen Logistics, LLC, No. A-5388-16T3, slip op. at 22 (N.J. App., Aug. 23, 2018).

New York amended its antidiscrimination statute in early 2018 to bar mandatory arbitration of discrimination claims. This is likely to face challenges under the FAA. The U.S. Supreme Court held that the FAA preempts state laws that limit arbitration in consumer contracts in certain circumstances in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011). This could be applied to employment contracts as well. This is why it is welcome news that the technology companies are dropping mandatory arbitration without the law requiring them to do so.

If you are involved in an employment dispute in New Jersey or New York, the Resnick Law Group’s experienced team of employment attorneys is here to help you. Please contact us today at 973-781-1204, at 646-867-7997, or online to schedule a confidential consultation to discuss your case.

More Blog Posts:

New Jersey Court Rules on Mandatory Arbitration in Whistleblower Case, The New Jersey Employment Law Firm Blog, November 30, 2018

New Jersey Court Denies Two Motions to Compel Arbitration by Employer in Wrongful Termination Lawsuit, The New Jersey Employment Law Firm Blog, July 6, 2018

New Jersey Appellate Court Invalidates Arbitration Clause in Employee Handbook, The New Jersey Employment Law Firm Blog, April 1, 2016

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