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THE FEDERAL ARBITRATION ACT vs. NY SEXUAL HARASSMENT PROTECTIONS

In the wake of the “Me Too” movement, politicians across the country have scrambled to remedy the ongoing issues concerning sexual harassment in the workplace. In response to the onslaught of sexual harassment claims that have come to light in recent years, New York State enacted new legislation within CPLR 7515 in 2018. The new law mandated that employers were prohibited from including in employment contracts any provisions that would force arbitration for claims or allegations of sexual harassment. The new provisions in CPLR 7515 aimed to prevent employers from sidestepping public litigation, where sexual harassment claims would certainly make headlines. Thus, sexual harassment would be strongly deterred because alleged perpetrators, in addition to their employers, would be cast into the spotlight of the “Me Too” movement and have their reputations severely damaged.


However, in June 2019, the fate of CPLR 7515 took a fatal turn. In Latif v. Morgan Stanley & Co. LLC, the Southern District of New York (“S.D.N.Y.”) held that the Federal Arbitration Act (“FAA”) preempted CPLR 7515. Under section 2 of the FAA, arbitration agreements are valid, irrevocable, and enforceable, with the exception of grounds that exist in law or in equity for the revocation of any contract. The Court argued that since CPLR 7515 was designed to protect victims of sexual harassment, and not intended to single out all arbitration agreements, the New York legislature failed to create a generally applicable contract defense that would be in line with section 2 of the FAA. As a result, the Court was forced to preempt CPLR 7515 under the Supremacy Clause of the United States Constitution, a provision that states that federal law is the supreme law of the land.


After the decision in Latif, employers were restored the right to include mandatory arbitration agreements in employment contracts within New York State. Ultimately, employers may continue to resolve disputes concerning sexual harassment through arbitration by implementing arbitration agreements within employment contracts. The effect of this decision will be felt by victims of sexual harassment in the workplace. Further, the decision in Latif gives sexual predators, and their employers, easy outs from public ridicule, in addition to failing to reasonably deter workplace sexual misconduct in the future. Given the traction of the “Me Too” movement, it will be interesting to see how Congress deals with the FAA in the future, as the current language of the law serves as a massive roadblock for those looking to fight sexual harassment in the workplace.

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