New York District Court Rules Agreements to Arbitrate Sexual Harassment Claims Enforceable

By Douglas Lipsky

In April 2018, lawmakers in New York enacted a measure that, among other things, barred the use of arbitration agreements in sexual discrimination and harassment claims. Now, the U.S. District Court for the Southern District of New York has ruled that an agreement to arbitrate sexual harassment claims is enforceable. 

The Backdrop

The SDNY ruling marks the first decision to challenge the viability of that law. In the case (Latif v. Morgan Stanley), the plaintiff signed an offer letter referencing the arbitration agreement, which provided that discrimination, harassment and retaliation claims shall be governed by the Federal Arbitration Act (FAA). The federal law holds, in part, that arbitration clauses in contracts affecting commerce are irrevocable and enforceable. 

The plaintiff’s lawsuit claims that he was subjected to inappropriate comments and conduct regarding his sexual orientation, offensive comments about his religion, and that he was sexually assaulted by a female supervisor. After reporting the harassment to his employer, the plaintiff alleges that he was wrongfully terminated in violation of state and federal law. The defendant filed a motion to compel arbitration. 

The SDNY Ruling

The district court, following U.S. Supreme Court precedent, ruled in favor of the defendant’s motion to compel arbitration, confirming that the FAA preempts a state law that bars arbitration. The judge wrote that  “when state law prohibits outright the arbitration of a particular type of claim … the conflicting rule is displaced by the FAA.”

What Is Sexual Harassment?

Sexual harassment in the workplace is considered an unlawful form of sex discrimination under local, state and federal law. Generally, there are two types of harassment — quid pro quo harassment (this for that) and hostile work environment. The former involves a person in a position of authority demanding sexual favors as a condition of employment or in exchange for any employment benefits (e.g. raises, bonuses, promotions). The latter occurs when an employee is subjected to offensive conduct, comments, or displays that are severe and pervasive enough to interfere with his or her ability to perform his job.

Why This Matters

While the ruling may indicate that employers can continue to require arbitration of sexual harassment claims, it may be best to consult an experienced employment law attorney to determine the best course of action. Given the tenor of the times, the heightened awareness of sexual harassment in the workplace, and growing employee demands for fair treatment of sexual harassment claims, trying to enforce an arbitration clause may not be the best approach.

This case further matters because these arbitration provisions help keep sexual harassment a secret. Litigating these cases in public court, by contrast, shines a brighter light on this problem.

About the Author
Douglas Lipsky is a co-founding partner of Lipsky Lowe LLP. He has extensive experience in all areas of employment law, including discrimination, sexual harassment, hostile work environment, retaliation, wrongful discharge, breach of contract, unpaid overtime, and unpaid tips. He also represents clients in complex wage and hour claims, including collective actions under the federal Fair Labor Standards Act and class actions under the laws of many different states. If you have questions about this article, contact Douglas today.