New #MeToo Issues Arise Over Waiving Arbitration Carveout Rights

New legal debates are emerging in sexual harassment lawsuits, including whether workers can waive their rights to avoid mandatory arbitration and if judges have the power to invoke that carveout for them.

Courts have grappled with several legal ambiguities in the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, a 2022 law stemming from the #MeToo social justice movement. Those include the appropriate pleading standard for employees to defeat a company’s motion to compel arbitration and whether the law covers non-sexual harassment claims that are intertwined with sexual misconduct allegations.

The US Court of Appeals for the Sixth Circuit recently added to that list, reversing an Ohio federal judge who kept former Menard Inc. worker Michelle Scoggins’s sexual harassment claims in court even though she “repeatedly and unequivocally” conceded she signed an arbitration agreement that applied to her case. The panel called the judge’s decision “an abuse of discretion to override a party’s deliberate waiver of an argument.”

The ruling leaves open the question of whether filing a lawsuit is enough to trigger the EFAA and prevent subsequent waivers of the law, attorneys and legal scholars said.

“It just seems a little bit confusing that a plaintiff can sort of elect to invalidate the arbitration clause by filing a lawsuit, then waive that right once in court,” said David Horton, a law professor at University of California, Davis School of Law.

Courts can raise some threshold issues in litigation of their own accord, such as whether a claim is ripe for judicial review or if the plaintiff established standing, legal scholars said. But they can’t assert affirmative defenses, like a statute of limitations, for a party.

“Public policy makes it appropriate that a court would raise arbitrability in these cases, even when it wasn’t explicitly raised,” said Ariana Levinson, a law professor at the University of Louisville’s Louis D. Brandeis School of Law.

Sarah Rudolph Cole, a law professor at Ohio State University and chair of the school’s alternative dispute resolution program, offered a different view.

“I don’t think courts should sua sponte apply the EFAA,” she said. If the plaintiff was “okay with arbitration, and affirms that, a court should compel arbitration.”

‘Election’ Question

The EFAA waiver issue intersects with a separate question on whether a plaintiff must expressly invoke the law in their complaint to activate its protections. No federal appellate court has yet ruled on this issue, according to a Bloomberg Law docket review.

A related waiver dispute is before the Ninth Circuit, but in a different context. It concerns a California district court’s recent decision permitting a former Structure Therapeutics CFO to proceed with her sex harassment case in court, despite her initial choice to pursue arbitration.

The worker initiated arbitration for claims not covered by the EFAA and later withdrew from the dispute resolution proceeding after discovering evidence of sex-based harassment, the lower court said.

The law states that an otherwise enforceable arbitration agreement is invalid “at the election of” an individual alleging sexual harassment under state, federal, or tribal law.

“Election” isn’t defined in the statute. But legal experts, referring to Black’s Law Dictionary and the EFAA’s legislative history, said a plaintiff makes an “election” when they choose to bring claims in court rather than arbitration, as Scoggins did in her case.

A plaintiff alleging sexual harassment claims automatically forfeits arbitration by going directly to court, even if they didn’t mention the EFAA, they said. Public Justice, the American Association for Justice, the National Employment Law Association, and the National Women’s Law Center also expressed this view in a joint amicus brief backing Scoggins.

“Presumptions are routinely used to determine arbitrability,” Levinson said. “The presumption is to stay in court, and because of the important policy implications, that’s why I would expect courts to address the issue.”

Pierson Ferdinand LLP partner Amy Epstein Gluck agreed there’s no legal requirement in the EFAA for plaintiffs to expressly invoke its protections to shield their case from arbitration.

“Employers need to understand that their arbitration provisions may or may not protect them from a public lawsuit if there’s a sexual harassment claim,” she said. “On the other hand, the Sixth Circuit’s order seems to indicate that if a worker doesn’t raise” the EFAA, the court “is not going to protect them by jumping in” and asserting the law on their behalf.

Other circuits may decide otherwise, Gluck said.