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How to Manage Sexual Harassment Cases After the Federal Ban on Forced Arbitration

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By Mark Carey

On February 14, 2022, we reported that Congress passed legislation banning forced arbitration in sexual harassment and sexual assault cases in employment.  On March 3, 2022, President Biden signed into law the federal ban on forced arbitration of all sexual harassment and sexual assault cases occurring at work. The law has a retroactive effect, meaning that it bans any and all prior employment agreements that forced employees into private and confidential arbitration.  The law did not affect sex and gender discrimination claims. However, according to the speeches made by the White House prior to signing the bill into law, President Biden has made it clear that his administration will take efforts to end forced arbitration for all employees across all protected classes of employees, including but not limited to race, sex, religious, sexual orientation, age, disability, national origin, and pregnancy discrimination.  The new law amends the Federal Arbitration Act (FAA) and makes arbitration a voluntary choice by the employee.

Five Important Facts Employees Need to Know

1.         You Must Have a Sexual Harassment Claim

Until the federal government bans forced arbitration regarding all forms of employment discrimination as expressly stated in the above speeches, only sexual harassment claims are covered under the new law. Although similar, gender claims are not sexual harassment claims. According to the U.S. Equal Employment Opportunity Commission (EEOC), sexual harassment is defined as follows:

“It is unlawful to harass a person (an applicant or employee) because of that person’s sex.   Harassment can include “sexual harassment” or unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature.

Harassment does not have to be of a sexual nature, however, and can include offensive remarks about a person’s sex. For example, it is illegal to harass a woman by making offensive comments about women in general.

Both victim and the harasser can be either a woman or a man, and the victim and harasser can be the same sex.

Although the law doesn’t prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal when it is so frequent or severe that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted).

The harasser can be the victim’s supervisor, a supervisor in another area, a co-worker, or someone who is not an employee of the employer, such as a client or customer.”

2.         Don’t Let Your Employer Fool You About Your Rights

Over the years I have seen many employers attempt to manipulate employees about their rights and the employers’ obligations under state and federal law. All employees need to check their employer’s human resource portal or employment manual regarding arbitration. The employer may not have updated the company policies and still seeks to enforce the outdated policy. Get informed and force your employer to follow the law regarding the ban on arbitration in sexual harassment and sexual assault cases.

3.         Your New Leverage and How to Use It to Get What You Want

Forced confidentiality via arbitration was the method most employers previously used to bury sexual harassment claims from the public view. When employers required employees to file an arbitration claim, there was no public dissemination of the bad actor’s sexual harassment practices. Today, Congress and President Biden have removed this troublesome employment practice. The new law shifts control over to employees and marks the start of a new era in managing sexual harassment cases.

Employees now have an enormous leverage over employers to force a settlement to their benefit. Employers do not like publicity about sexual harassment cases in the wake of the #metoo movement. Employees must threaten litigation, i.e., the threat of filing a lawsuit in state or federal court. We routinely draft sexual harassment complaints and send them to employers’ counsel for purposes of promoting settlement negotiations. The removal of the forced arbitration practice has now forced many employers to settle out of court with sexual harassment victims because they cannot mandate employees into private confidential arbitration proceedings.

This new employee leverage must be viewed on a continuum, as not all sexual harassment cases are alike. On the left side of the spectrum you have borderline sexual harassment cases where the employer’s liability is questionable or less than 50/50. Employers usually defend these cases and refuse to settle. In the middle are the more serious cases that cast a negative light on the employer’s reputation. On the extreme right side of the continuum we see top level executives, and even C-Suite executives, being accused of gross sexual harassment. Employers have no choice but to settle these cases (middle and right side of continuum) or risk a publicity nightmare and an SEC investigation, i.e. Activision Blizzard, Inc

4.         Filing Administrative Complaints

If you have a sexual harassment claim, you are required to exhaust your administrative remedies by filing a complaint with the EEOC and the relevant state agency. The EEOC now has a new online complaint filing portal. The filing of the claim stops the clock on the 300 day look back period (statute of limitations), a period where adverse employment actions have occurred. 

5.         Settlement Tips

If you have reached the stage of settlement negotiations with your employer, here are a few important tips to help you finalize a settlement under new state laws. In the wake of the #metoo movement, several states including New York, California, Illinois, New Jersey, and Oregon, have passed laws banning forced confidentiality in not only sexual harassment cases but all employment discrimination cases.  For example, the New York statute §5-336 bans confidentiality agreements, also called nondisclosure agreements, in settlements of all employment discrimination claims unless the employee requests such an agreement. This is huge break from past practices of covering up bad actor sexual harassment cases and now makes them public. In the past, employers required confidentiality as a condition of the settlement. Today, employees who are presented with confidentiality agreements as a condition of a settlement, must object in writing to the employer and their counsel, stating they do not require nor prefer a separate confidentiality agreement.

Employers will attempt to place part of the settlement money as a consideration for the confidentiality agreement. Employees must object to this illegal use of the settlement money to force them to accept the prohibited confidentiality agreement. Do not expect the employer and their attorneys to roll over and play fair. If you encounter further resistance, you may want to send an email to the relevant Attorneys General for your state and copy opposing counsel. The AGs office is aware of the practice and may get involved to force the employer’s adherence to the statutory requirements.

If you need more information about the end of forced arbitration in employment discrimination cases, please contact Carey & Associates, P.C. by email at info@capclaw.com or call 203-255-4150.

Listen to Podcast: How to Manage Sexual Harassment Cases After the Federal Ban on Forced Arbitration