#MeToo Arbitration Law’s Impact on ‘Entire Case’ Needs Clarity

Practitioners are closely watching federal appeals courts for clarity on whether a recent law that lets workers opt out of sexual harassment arbitration extends to all claims, including those unrelated to employment or the alleged harassment.

The US Court of Appeals for the Sixth Circuit was presented with the question in a May 12 appeal by law firm Adams & Reese LLP, while the Second Circuit was asked May 27 to address it in an appeal by TikTok Inc. and its parent ByteDance Ltd. The New York-based court separately has the question before it in a suit against a litigation-management platform and a Dallas law firm.

The ability of a worker invoking the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act to void an otherwise valid arbitration agreement with regard to their “entire case,” as opposed to just some claims, has previously percolated up to the circuit level but hasn’t been resolved. That includes the Sixth Circuit, in which the issue was argued in cases involving Menards and United Wholesale Mortgage LLC.

The question has mostly come up at lower-level state and federal courts, with a majority of decisions holding a worker’s whole case can avoid arbitration when the act is properly invoked, lawyers told Bloomberg Law. But they offered mixed views on the need for clarity and what it might look like.

A ruling letting workers to keep all claims before a judge when a suit includes sexual harassment allegations would ensure the EFAA’s fulfills its purpose of not silencing victims by allowing them their day in court if they choose to opt-out of arbitration, which greatly favors employers, employee-side lawyers said. Management-side attorneys countered that permitting workers to sidestep agreements to arbitrate claims unrelated to sexual harassment or on a classwide basis would undermine the speed, cost, and other efficiencies gained when claims are pursued in arbitration, and would conflict with longstanding federal policy of enforcing arbitration pacts under traditional contract laws.

The United Wholesale case noted the issue is unsettled, and at least one federal judge has said the question may be destined for the US Supreme Court, Clark Hill PLC’s Robert N. Dare said.

‘Overwhelming’ Majority

Most rulings have turned on the EFAA’s text, which states that “no predispute arbitration agreement or predispute joint-action waiver” is “valid or enforceable with respect to a case” that relates to a sexual assault or sexual harassment dispute.

The “overwhelming” majority of those decisions have held that “case” means the entire case, Wigdor LLP’s John S. Crain said. The word has a specific meaning and Congress used “claim” elsewhere in the EFAA, showing it intended the opt-out to cover all of a worker’s claims, he and Detroit-based attorney Carla D. Aikens said.

A “case” is made up of “claims,” Crain said.

The #MeToo-inspired law doesn’t say to exclude certain claims, Aikens said. Separating some to send them to arbitration just doesn’t make sense, she said.

It would be contrary to claim-splitting and joinder rules, which prevent litigants from dividing claims over multiple lawsuits or failing to sue an indispensable party, the attorney said. A worker who doesn’t bring all their claims together risks being precluded from pursuing all their allegations, and divided proceedings drive up costs and create judicial-economy concerns, Aikens said.

Claim-splitting would be no better than forcing harassment claims into secretive arbitration, Crain said. Workers have fewer resources than employers, and they may be proceeding pro se or have counsel working on a contingency-fee basis, he said.

‘Real Risk’

In Mera v. SA Hospitality Group LLC, a Manhattan federal judge eschewed an entire-case approach, holding that a gay restaurant employee’s class claims for alleged wage violations were unrelated to his sexual harassment allegations.

A New Jersey judge also ruled that claims can be split when the EFAA is invoked, FordHarrison’s Gregory B. Reilly and Hannah R. Kramer said. So there’s some divide on the issue, they said.

Workers being allowed to opt-out of arbitration of claims asserting classwide wage-and-hour or other violations is “the real risk” for employers, Reilly said.

There haven’t been many rulings yet, making it hard to predict which view will ultimately prevail, the FordHarrison lawyers said. The New Jersey case signals that state courts are grappling with the issue, too, they said.

Congress’s choice of the word “case” doesn’t line up with the statute’s purpose, Dare said. The law was designed to permit harassment victims to pursue such allegations in a public forum, not to bypass arbitration on all claims, he said. The law’s aim would still be accomplished even if some claims are arbitrated, the Clark Hill lawyer said. Dividing claims between courts and other forums isn’t a new concept, he said.

Adding sexual harassment allegations to a case involving a bunch of other claims shouldn’t be grounds to void an entire arbitration agreement, Dare and the FordHarrison lawyers said.

Line Drawing Debated

Under a less-than-all-claims approach, the question becomes “where do you draw the line,” Dare said.

“It’s a difficult thing,” but there are parameters on what constitutes sexual harassment that would provide guidance, the lawyer said. The proper test may be how intertwined other claims are with the sexual harassment allegations, he said, noting some cases have turned on that analysis.

Mera suggests courts may push back on letting employees opt out as to nationwide wage allegations or claims wholly unrelated to sexual harassment, Crain said. But it doesn’t make sense to break up job-related claims and the EFAA expressly references collective allegations, he said.

There’s really no need for circuit guidance regarding individual claims or those not completely unrelated to employment, the Wigdor attorney said.

While waiting for circuit guidance, employers can state in arbitration agreements that they cover all claims other than sexual harassment, Reilly said. That could provide a basis to argue a worker consented to exclude other claims, notwithstanding the EFAA, he said.