As we reported on June 21, New York blew the lid off 30 years of sexual harassment and discrimination law by passing legislation that, among other things, bars mandatory arbitration of all claims of discrimination. That earthquake was followed by a substantial aftershock: according to a federal court, that provision of the state law doesn’t square with federal law, which specifically permits arbitration of these claims.

This latest monkey-wrench was thrown into the gears just last week by federal district court Judge Denise Cote when she held that New York’s arbitration law prohibiting arbitration of sexual harassment claims (effective as of July 2018 and reported on by this blog last year) is preempted by the Federal Arbitration Act (“FAA”), and is therefore invalid. This is the first case deciding the merits of this arbitration exclusion. And although Judge Cote didn’t formally rule on the more general, brand-new bar on arbitration of all discrimination claims (harassment or not), she observed in a footnote that the more general bar suffers from the same problem and is probably preempted by federal law, too.

This decision will likely result in a failure-to-launch of the arbitration prohibitions in this latest round of legislation. But for now, here’s the unsettling message for employers navigating the ever-shifting landscape of discrimination law obligations: the new provisions of New York law barring mandatory arbitration of all employment discrimination claims will be struck down, but for the time being, you can’t count on it.


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