Further Erosion of Arbitration From Employment Agreements

Topics: Arbitration Agreements

Employers should be concerned that just this week, Democratic lawmakers (Sen. Cory Booker of New Jersey and Rep. Colin Allred of Texas) outlined legislation that would ban the arbitration of claims involving race discrimination in the employment context -- The Ending Forced Arbitration of Race Discrimination Act.  

Employers are all too familiar with challenges to the practice of mandatory arbitration. Many such challenges and the resulting rulings are crucial to employers otherwise faced with class action and PAGA claims filed in court. However, more recently and particularly since the #MeToo movement, arbitration agreements of even single-plaintiff disputes have been the subject of higher scrutiny. 

Proponents of the bill argue that the practice of mandatory arbitration forces employees to “sign away their right to hold their employer accountable in court for racial discrimination” discounting the benefits of arbitration, including streamlined proceedings and prompt resolution of discovery disputes, which might resolve employees’ problems more swiftly than resorting to the courts.   

The Ending Forced Arbitration of Race Discrimination Act would:

1. Define a “race discrimination dispute” as “a dispute relating to conduct that is alleged to constitute discrimination (including harassment), or retaliation, on the basis of race, color, or national origin under applicable Federal, Tribal, State, or local law.”
    
2. Void pre-dispute arbitration agreements or pre-dispute joint/class action waivers where there is an allegation of race discrimination in the workplace under federal, state, tribal, or local law (in either a single plaintiff or class/representative basis).
    
3. Mandate that the determination as to whether an agreement requiring arbitration of racial discrimination claims is enforceable, and whether the Act applies, is made by a court and not an arbitrator.

This effort expands the March 2022 law, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA), that precludes employers from requiring employees to arbitrate disputes related to sexual harassment. However, given the current political climate in Washington, it is far from clear that The Ending Forced Arbitration of Race Discrimination Act will swiftly follow the EFASASHA’s footsteps.  

CDF will track developments closely. In the meantime, employers should continue to review their employment arbitration agreements and practices with their favorite CDF attorney to maximize the future enforceability of such agreements.