A Southern District judge has ruled that an employment discrimination case can be litigated in federal court even though (1) the plaintiff signed an arbitration agreement and (2) the plaintiff raises non sexual harassment claims. The reason for this is the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.
The case is Johnson v., Everyrealm, Inc., 22 Civ. 6669, 2022 WL 2216173 (S.D.N.Y. Feb. 24, 2023). Plaintiff sues for a variety of civil rights violations: race discrimination, pay discrimination, state-law infliction of emotional distress, and sexual harassment. Prior to the Act, the case would be sent to arbitration immediately. The courts have interpreted the Federal Arbitration Act to broadly protect employers from courthouse litigation when the employee signs an arbitration agreement. But the 2021 Act amends the Federal Arbitration Act, as Congress does not want sexual harassment disputes litigated behind closed doors, which is what arbitration is all about.
Under the 2021 Act, which applies only to claims that accrued on or after March 3, 2022, a sexual harassment dispute is defined as "a dispute relating to conduct that is alleged to sexual harassment under applicable Federal, Tribal, or State law." The Act also says that even if the employee signed an arbitration agreement, that agreement is unenforceable "with respect to a case which is filed under Federal, Tribal, or State law and relates to . . . the sexual harassment dispute." A court determines arbitrability, not the arbitrator. Take a close look at the statutory language and note that the statute relates to a "case" and not a "claim." That distinction is key to the court's ruling in this case.
The dilemma here is that plaintiff is not just claiming sexual harassment but race discrimination and other violations that do not relate directly to a sexually-hostile work environment. Can a judge split the case and keep the sexual harassment case in federal court and send the rest to arbitration? The statute does not specifically address this issue, though the Federal Arbitration Act authorizes this kind of piecemeal litigation. So Judge Englemayer engages in statutory construction.
The 2021 Act, which says that the arbitration agreement is not enforceable "with respect to a case which is filed" under various laws "and relates to the . . . sexual harassment dispute," means that "a 'case' or 'action' refers to an overall legal proceeding filed in a court, whereas a 'claim' or a 'cause of action' refers to a specific assertable or asserted right within such a proceeding." The court uses dictionary definitions in reaching this finding, a process authorized by the Supreme Court. Under this analysis, Congress did not want piecemeal litigation, with some claims going to arbitration and the sexual harassment claim in federal court. The court sums it up this way:
With the ordinary meaning of "case" in mind, the text of § 402(a) makes clear that its invalidation of an arbitration agreement extends to the entirety of the case relating to the sexual harassment dispute, not merely the discrete claims in that case that themselves either allege such harassment or relate to a sexual harassment dispute (for example, a claim of unlawful retaliation for a report of sexual harassment).
A few other noteworthy points. First, the court holds that it must first determine whether the plaintiff has a plausible sexual harassment claim under Rule 12 before it applies the 2021 Act. It is not enough to simply assert the plaintiff has a sexual harassment claim in order to get around the FAA's pro-arbitration mandate. Also, the court notes that there is no definitive ruling that holds that the 2019 amendments to the New York State Human Rights Law, which liberalized the sexual harassment laws in New York, makes the State HRL identical to the New York City HRL, which was amended years ago to make it easier for plaintiffs to win these cases.
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