Restricting Mandatory Arbitration Agreements in Sexual Harassment Cases
Updated: Jan 7, 2020
By Zoë Seaman-Grant
In the United States, over sixty million employees are subject to mandatory arbitration agreements as a condition of employment. In these agreements, employees waive their rights to litigate employment-related claims, including Title VII claims, in court. Title VII is a federal statute that prohibits, among other things, discrimination on the basis of sex and includes sexual harassment in its definition of sex discrimination. By forcing employees to submit to binding arbitration, employers bar employees from bringing sexual harassment claims against employers in court. Given the unique harms of binding arbitration in the context of sexual harassment claims against employers, states should be permitted to carve out exceptions to mandatory arbitration agreements for sexual harassment and other Title VII claims.
Among other enforcement mechanisms, Title VII authorizes a private right of action for employees to bring civil rights claims in court. Mandatory arbitration agreements for Title VII claims undermine this statutory scheme by prohibiting aggrieved employees from bringing their claims in court. Disrupting the statutory scheme established by Title VII might be acceptable if complainants got equivalent or better results from arbitration as they do from litigation, but there are compelling reasons to believe arbitration results in worse outcomes for complainants than litigation. For example, arbitration agreements typically include nondisclosure agreements that forbid the complainant from revealing the nature or final outcome of the dispute. By preventing complainants from speaking about sexual harassment at the company, the public remains unaware of sexual misconduct at the company and, therefore, the company avoids public pressure to fire sexual abusers. For fourteen years, Fox News managed to prevent six women from speaking about settlement agreements they reached in sexual harassment cases with Fox and Bill O’Reilly. Additionally, when employees are unaware of other successful sexual harassment claims against the employer, employees can be discouraged from bringing claims because they mistakenly believe they cannot win a suit against their employer, or believe that the harassment or abuse they have experienced is not serious enough to warrant a lawsuit.
In the face of public pressure to limit mandatory arbitration claims with respect to sexual harassment, the New York state legislature in 2018 forbade employers from requiring employees with sexual harassment claims to submit to binding arbitration. In June of 2019, however, less than a year after New York’s ban on mandatory arbitration for sexual harassment claims became effective, a federal district court held in Latif v. Morgan Stanley Co. LLC that the Federal Arbitration Act preempted the New York ban on arbitration agreements with respect to sexual harassment claims. This means that federal law, not state law, governs arbitration agreements, and bars states like New York from placing restrictions on arbitration agreements that conflict with federal law. Federal law is highly deferential to arbitration agreements between employers and employees, and therefore leaves states few options for regulating arbitration agreements.
If the current division of power between state and federal law continues, states will remain unable to restrict arbitration agreements. Therefore, if states want to restrict arbitration agreements due to public policy concerns, reformers should focus on changing the Federal Arbitration Act in order to permit states greater autonomy in regulating arbitration agreements. State reforms are unlikely to succeed without changes to the Federal Arbitration Act.
 Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration: Access to the Courts is Now Barred For More Than 60 Million American Workers, Economic Policy Institute (Sep. 27, 2017), https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration/.
 Marsha Levinson, Mandatory Arbitration: How the Current System Perpetuates Sexual Harassment Cultures in the Workplace, 59 Santa Clara L. Rev. 485, 495 (2019).
 Facts About Sexual Harassment, U.S. EEOC, https://www.eeoc.gov/eeoc/publications/fs-sex.cfm.
 Marsha Levinson, Mandatory Arbitration at 513.
 M. Isabelle Chaudry, An Analysis of Attempts to Amend the Federal Arbitration Act: What Policy Changes Need to Be Implemented for #MeToo Victims, Seton Hall Leg. Journal (2019).
 Bill O’Reilly, How Bill O’Reilly Silenced His Accusers, N.Y. Times (Apr. 4, 2018). https://www.nytimes.com/2018/04/04/business/media/how-bill-oreilly-silenced-his-accusers.html.
 Vivian Wang, New York Rewrites Harassment Laws, but Some Say the Changes Fall Short, N.Y. Times (Mar. 30, 2018). https://www.nytimes.com/2018/03/30/nyregion/new-york-revised-sexual-harassment-laws.html?module=inline.
 Latif v. Morgan Stanley & Co., LLC, 2019 WL 2610985 (S.D.N.Y. 2019).