In a decision from the United States District Court for the Southern District of New York, U.S. District Judge Denise Cote has held, in Latif v. Morgan Stanley & Co. LLC, that Section 7515 of New York's Civil Practice Law and Rules (CPLR), which prohibits mandatory arbitration of sexual harassment claims, is inconsistent with the Federal Arbitration Act ("FAA"), and therefore, is invalid and unenforceable.
In April of 2018, New York State enacted several laws in an effort to address workplace sexual harassment including a prohibition on pre-dispute agreements to arbitrate sexual harassment claims. In Latif, the plaintiff was hired to work in the New York office of Morgan Stanley and signed an offer letter which included an agreement that all claims against Morgan Stanley (including sexual harassment claims) were subject to mandatory arbitration. Shortly after the employment commenced, plaintiff complained to Human Resources that he had become a target of inappropriate comments concerning his sexual orientation and his religion, and received certain unwanted sexual advances. After a lengthy email discourse concerning these allegations, plaintiff's employment was terminated.
Plaintiff then commenced a lawsuit alleging discrimination, hostile work environment and retaliation claims in violation of Title VII of the Civil Rights Act of 1964. Morgan Stanley filed a motion to compel arbitration. Plaintiff opposed the motion solely with respect to the sexual harassment claims, which, he contended, could not be compelled to arbitration because of CPLR 7515.
Relying heavily on U.S. Supreme Court precedent, Judge Cote rejected the plaintiff's argument that CPLR 7515 rendered invalid the agreement to arbitrate his sexual harassment claims. Citing the Supreme Court's decision in AT&T Mobility LLC v. Concepcion, Judge Cote recognized a principal enunciated by the Court that "[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: the conflicting rule is displaced by the FAA." Thus, Judge Cote held that the FAA preempted New York's ban on precluding mandatory arbitration of sexual harassment claims.
Judge Cote addressed in a footnote the New York legislature's passage on June 19, 2019 of a bill, which would, among other things, expand CPLR 7515 to encompass a ban on mandatory arbitration of claims of discrimination generally, rather than specifically sexual harassment claims. However Judge Cote indicated that the amended law would likely also be found invalid and therefore "would not provide a defense to the enforcement of the Arbitration Agreement."
The decision in Latif highlights the strong presumption by Courts in favor of arbitration, and certainly provides support for New York employers who wish to enter into mandatory arbitration agreements for these kinds of claims. Given that the Ending Forced Arbitration of Sexual Harassment Act, which would amend the FAA to prohibit arbitration of sexual harassment claims, is pending in Congress, it is possible this may change in the future; however so far this proposed legislation has not appeared to receive traction. Lawyers advising businesses should of course continue to keep apprised of these potential changes.
Originally Published by ABA Business Law Today
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