A split has appeared in how to handle sexual harassment cases with a New York trial judge ruling recently that the state’s Human Rights Law prevents companies and employees from entering arbitration over sexual harassment. This contradicts an earlier ruling in New York’s Southern District where a judge ruled that arbitration under the Federal Arbitration Act (FAA) supersedes New York’s statutory prohibition against arbitration.
There is a useful summary of the most recent decision at Mintz, but the quick takeaways are that when statutory law changed in 2018, which allowed plaintiffs to seek relief in court rather than through arbitration, employers, even those who had previous employment agreements that stipulated arbitration, were arguably no longer able to seek arbitration under the FAA laws; furthermore, the judge argued that any mandatory arbitration clauses were invalidated by the new state law.
Confounding matters further, in February another trial judge in New York ruled that changes in the law do not invalidate previous arbitration agreements. At the moment, it remains unclear whether employers’ mandatory arbitration clauses regarding sexual harassment complaints are valid any longer. As there are sure to be appeals, this is a case we will be watching.