Mandatory arbitration clauses have become a common feature in many employment contracts, requiring employees to submit their claims to alternative dispute resolution (ADR) instead of going to court. As New York City sexual harassment attorneys, we have found that arbitration often tends to favor defendants in employment disputes. It also deprives aggrieved employees of their “day in court,” since ADR proceedings are usually subject to non-disclosure rules. The state of New York enacted a law invalidating mandatory arbitration clauses in sexual harassment cases. This was meant to ensure that individuals alleging sexual harassment could have their day in court. Earlier this summer, however, a Manhattan federal court ruled that the Federal Arbitration Act (FAA) preempts the New York law.
Employment statutes at multiple levels in New York City prohibit discrimination on the basis of sex and other factors. Under all of these laws, sexual harassment is considered to be sex discrimination. Each statute defines procedures that claimants must follow in order to assert their rights. Federal law, for example, requires a claimant to file an administrative charge with a federal agency before they may file suit in a court of law. Mandatory arbitration clauses prevent claimants from initiating both administrative and judicial proceedings.
Arbitration resembles a courtroom trial in some ways. Both sides present evidence and arguments to a neutral third-party arbitrator, and the arbitrator makes a decision. If the contract calls for binding arbitration, the similarities to an official lawsuit mostly end. Under the FAA, courts of law may not vacate a binding arbitration award unless there is evidence of “corruption, fraud, or undue means,” or other “misconduct.” 9 U.S.C. § 10(a). A court may not modify a binding arbitration award without evidence of a “material miscalculation” or other error. Id. at § 11.