Many employers rely on pre-dispute arbitration agreements to resolve employment litigation in private arbitration rather than in court. However, two recent bipartisan bills introduced in Congress may change the employment litigation landscape.
Earlier this month, bipartisan bills were introduced in both the United States House of Representatives and the Senate that, if passed, will drastically alter employment litigation in the United States. Indeed, the proposed legislation may eradicate pre-dispute arbitration agreements between employers and employees. Although the House version of the legislation, the “Ending Forced Arbitration of Sexual Harassment Act” appears to be aimed at excluding ONLY sexual harassment claims from arbitration, the proposed legislation will actually amend the Federal Arbitration Act (FAA) in a much broader way. As currently phrased, the proposed legislation may actually exclude ALL employment claims from the FAA. As drafted, the proposed legislation amends the FAA transportation worker exclusion in 9 U.S.C. Section 1 as follows: “. . . but nothing herein contained shall apply to contracts of employment. The Senate version of the bill, co-sponsored by both of California’s Senators is not available online yet.
This proposed legislation would have a drastic impact on employers in California and across the United States who utilize arbitration agreements, whether optional or as a condition of employment. The bill would also affect employers who rely on class action waivers in arbitration agreements as a sword to stave off putative class actions in their infancy. Class action waivers can potentially save companies significant amounts of money, while still permitting individual employees to seek damages in arbitration in their individual capacity. As a reminder, the Supreme Court of the United States heard oral argument on October 2, 2017, on three consolidated cases that will decide the fate of class action waivers in the employment sphere. You can read our prior blog about the issue here. An opinion is expected before June 2018.
As to the pending bills in Congress, it is not too late for employers to contact their representatives concerning the proposed legislation. Eradicating sexual harassment is a goal all employers can and should support. However, the proposed legislation would harm employers by excluding all employment disputes from arbitration.