Ambiguities in the Proposed “Ending Forced Arbitration of Sexual Harassment Act of 2017”

Earlier today, bipartisan members of the Senate and House introduced the “Ending Forced Arbitration of Sexual Harassment Act of 2017.”  (click here for a copy of the House bill)

A core part of the House bill states the following: “no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of a sex discrimination dispute.”

I strongly support the bill and applaud the bipartisan group proposing this legislation.

However, I see some ambiguities regarding the bill.  For example, in a section titled “Technical & Conforming Amendments,” the proposed bill amends section 1 of the FAA so that everything after the word “employment” is deleted in section 1 of the FAA.  This amendment will therefore have the effect of exempting ALL employment agreements from the coverage of the FAA, a result I strongly support.  Although I applaud and support the banning of all predispute arbitration agreements in employment contracts, I would not place such a far-reaching amendment under the heading of “Technical & Conforming Amendments.”

Also, the core part of the bill banning the enforcement of arbitration agreements covering a “sex discrimination dispute” seems redundant in light of the “technical” amendment to section 1 of the FAA, which would result in the broad ban of all employment arbitration agreements.  Furthermore, the title of the bill and the core part of the bill specifically mentioning “sex discrimination dispute” suggest the purpose of the bill is much narrower than the broad effect of the “technical” amendment to section 1.

Also, consider the following hypothetical:

Suppose an employment agreement says something to the effect that “all disputes between the employee and employer are subject to binding arbitration, including claims of sex discrimination.”  Suppose a worker then files a claim under the FLSA.  Literally, the text of the written agreement requires arbitration of a sex discrimination claim, and thus under the language of the proposed bill, this predispute arbitration agreement is not valid because “it requires arbitration of a sex discrimination dispute.”  So, under a very literal reading and application of the statute, one can argue that the entire agreement is invalid and not enforceable for any purpose, including in connection with the wage dispute under the FLSA.   In other words, under a literal application of the statute, any agreement that purports to cover a sex discrimination claim is tainted by that improper purpose.

I am not 100% certain of the intentions of the drafters here.  There is some disconnect between the language of the statute, the title of the bill, statements made during the press conference today announcing the bill, and the core provision banning arbitration of a “sex discrimination dispute.”  In other words, there are conflicting signals whether the bill is intended to have a broad scope (and broadly ban arbitration for all employment relationships) or narrow scope (applicable just to sex discrimination disputes).

Also, the original FAA was intended to apply solely in federal courts, which Justice Thomas repeatedly recognizes in his opinions.  Some day in the future, suppose the Supreme Court adopts Justice Thomas’s view and gives a narrow reading to the FAA as applicable only in federal court (this involves the infamous Southland v. Keating holding from 1984).  If the FAA is restored to its original meaning as applicable solely in federal court, will this amendment correspondingly shrink, as the FAA shrinks, so that states can continue requiring arbitration of sex discrimination disputes?  To make it crystal clear that this amendment applies to both state and federal courts, I would change the amendment to read something like “no predispute arbitration agreement shall be valid or enforceable IN STATE OR FEDERAL COURT if it requires arbitration of a sex discrimination dispute.”

In sum, I am happy to see this proposed bill, and with the new political environment regarding sexual harassment, maybe the bill can make it out of committee and gain traction in Congress so that it can be enacted.  However, the language needs to be improved to make the intent of Congress clear with this amendment.  With the existing FAA, which is badly outdated, I already see months or even years of wasteful litigation over the meaning of the existing FAA (litigating about whether the parties will litigate).  Arbitration law needs absolute clarity so that disputes appropriately belonging in arbitration can be submitted to arbitration, without ancillary litigation proceedings fighting over the meaning and applicability of arbitration law.

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