Federal Arbitration Act – When The Abuser Goes To Work…

Huge Step Forward For Sexual Harassment Victims

Sexual harassers in the past managed to slither undetected from workplace to workplace, thanks to the anonymity offered by forced arbitration.

But times are changing.

President Joe Biden this week signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, landmark legislation that prevents employers from requiring workers to sign arbitration agreements that preclude them from filing in a lawsuit in court involving sexual assault or sexual harassment.

Biden called it a “momentous day for justice and fairness in the workplace.”

His assessment was affirmed by a rare lack of partisanship in Congress. The U.S. Senate approved the measure on a voice vote, which meant there was no opposition. There was a split roll call vote in the House of Representatives but it was approved by 222 Democrats and 113 Republicans. Yet, 97 House Republicans opposed the bill, including a number of women.

Clueless Dupes?

Why would a female legislator oppose something that protects women from violence in the workplace? The bill merely brings sexual harassment into the light of day by giving victims the right to go to court. Workers can still voluntarily opt to proceed with arbitration if they choose.

A Primer On How Employers Can Exempt Themselves From Civil Rights Laws

What are the chances employers will hire job applicants who opt-out of a “voluntary” clause that requires them to forgo their right to file a lawsuit if they are subject to future civil rights violations?

Lori Burchett thought the odds were not good when she applied to work as a “My Stylist” at a Macy’s Inc. store at Oak Brook Center in Illinois in 2017. In any case, she didn’t want to gamble. She needed a job.

Burchett, then 58, agreed to something that was clearly not in her best interests, a clause requiring her to submit to arbitration any future claims of employment discrimination based on age, gender and race.

In the following months, Burchett alleges she encountered gross age discrimination from managers and coworkers that led to her termination by Macy’s in 2018.

U.S. District Judge Sharon Johnson Coleman earlier this month dismissed Burchett’s age discrimination lawsuit and granted Macy’s motion to compel arbitration in the case.

Judge Coleman notes that Burchett, who represented herself, “contends that Macy’s would not have hired her if she did not sign the arbitration agreement.”

But Judge Coleman said Macy’s legal team provided “painstakingly detailed evidence and averments” that Burchett was informed in advance of hire that she could opt-out of the arbitration clause.

“Without proof to the contrary, courts will not presume that arbitration is unfair or biased, especially in light of federal policy favoring arbitration,” ruled Judge Coleman.

Apparently, Burchett’s “averments” did not constitute evidence or proof to the contrary.

The implications of Judge Coleman’s ruling is that employers can easily exempt themselves from being sued in federal courts for future violations of U.S. civil rights laws simply by asking job applicants to sign a “voluntary” arbitration clause in an employment agreement.

Employer gets Immunity from Class Action

Workers this week suffered another potentially devastating blow when an influential appellate court ruled in Parisi v. Goldman Sachs & Co, that a former managing director could not file a class action lawsuit against Goldman Sachs for sex discrimination because she had signed a contract agreement to arbitrate employment disputes.

The decision by the Second Circuit Court of Appeals in New York creates a scenario that allows a savvy employer to class-action proof itself.

The appellate court ruled that Lisa Parisi, a former managing director of Goldman Sachs, could not sue the company in a class action because she agreed to submit all employment disputes to binding arbitration when she signed a “managing director” agreement in 2003. Since the “managing director” agreement is silent as to class actions, Parisi must proceed to arbitration on an individual basis. Bottom line: Parisi can’t sue in class action and she can’t arbitrate in class action.

Parisi, who was fired in 2008, alleged Goldman Sachs conducted a “pattern and practice” of sex discrimination against top female employees in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq. (“Title VII”) and the New York City Human Rights Law. She said she could not proceed in arbitration with a class action claim without Goldman Sachs permission and thus was effectively being denied her right to sue the company for systemic sex discrimination.. In other words, she said the arbitration clause in her agreement must be invalidated because arbitration would preclude her from vindicating a statutory right to file a “pattern and practice” class action lawsuit.

The appellate court agreed with Goldman Sachs that no substantive statutory right exists for employees to pursue a class action “pattern-or-practice” claim.

The court’s decision reversed two earlier decisions by a federal magistrate and a district court judge who both denied Goldman Sach’s motion to compel arbitration in the case.

The ruling is a boon to employers who are prescient enough to force new hires or employees who are being promoted to sign over-reaching binding arbitration clauses; it effectively negates the possibility that the employee will participate in a costly class action lawsuit down the road.

Goldman Sachs took the position that it could not be sued by Parisi in federal court because of the arbitration clause, and it could not be compelled to defend a class action suit in arbitration because the arbitration clause in the agreement Parisi signed was silent as to the arbitration of class claims.

Goldman Sachs is not entirely of the woods. Parisi filed the class action lawsuit along with two other Goldman Sachs employees, Shanna Orlich, an associate, and H. Christina Chen-Oster, a vice president, who reportedly did not sign binding arbitration agreements with Goldman Sachs and presumably could proceed without Parisi.

Parisi’s employment agreement contained an arbitration clause in which she agreed to arbitrate any dispute, controversy or claim arising out of or based upon or relating to “Employment Related Matters.” The agreement defined “employment related matters” are defined as “matters arising out of or relating to or concerning this Agreement, your hire by or employment with the Firm or the termination thereof, or otherwise concerning any rights, obligations or other aspects of your employment relationship in respect of the Firm.”

The appellate court reasoned that the U.S. Supreme Court has consistently interpreted the Federal Arbitration Act as establishing a “federal policy favoring arbitration agreements.” It also cited an earlier ruling in which the appeals court concluded that in Title VII jurisprudence “pattern-or-practice” simply refers to a method of proof and does not constitute a “freestanding cause of action.” Chin v. Port Authority of New York, 685 F.3d 135, 148 (2d Cir. 2012).

The arbitration clause in question states the Plaintiffs claims will be “finally settled by arbitration in New York City before, and in accordance with the rules . . . of, the New York Stock Exchange, Inc. (“NYSE”) or . . . the National Association of Securities Dealers (“NASD”). If both the NYSE and NASD decline to arbitrate the matter, the matter will be arbitrated before the American Arbitration Association (“AAA”) in accordance with the commercial arbitration rules of the AAA. You agree that any arbitration decision and/or award will be final and binding.”

Goldman’s appeal was supported by briefs from the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association. Parisi had support from the NAACP Legal Defense and Education Fund and the National Women’s Law Center.

The case is Parisi v. Goldman Sachs & Co, 2nd U.S. Circuit Court of Appeals, No. 11-5229.