Texas Lawyer magazine has published an article by M2D partners Mike Muskat and Corey Devine detailing what employers should know about mandatory employment arbitration. The article, “Texas Employers Should Beware of Efforts to Limit Mandatory Employment Arbitration” (subscription required), provides practical perspective on the growing patchwork of federal and state laws regarding the permissibility and enforceability of mandatory employment arbitration agreements.
In the article, Mr. Muskat and Mr. Devine explore the tension between the widespread use of arbitration agreements by American private-sector employers and growing public sentiment opposing such agreements.
The article goes on to examine recent developments that “have the potential to reduce the number of workplace claims that may be compelled to arbitration,” including:
1. Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act
In March of 2022, the #MeToo movement achieved a significant victory when President Bident signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the “Act”). The Act gives a “person alleging conduct constituting a sexual harassment or sexual assault dispute” the election to invalidate an arbitration agreement.
2. The “FAIR” Act
Also in March, the U.S. House of Representatives passed the “Forced Arbitration Injustice Repeal Act of 2022,” or “FAIR Act.” It would make pre-dispute arbitration agreements and other agreements to waive class or collective action rights unenforceable in employment, antitrust, consumer and civil rights disputes. And while it is unlikely the Senate would pass the broad ban, employers should remain apprised of it and any similar proposals.
3. State Law Developments
In 2019, the California legislature passed Assembly Bill 51, which makes mandatory employment arbitration agreements illegal in California. It is now facing a challenge in the Ninth Circuit Court of Appeals. New York and New Jersey also passed legislation banning arbitration of certain employment disputes. Those laws were struck down on FAA preemption grounds.
The article concludes by encouraging employers to remain up to date on any efforts, whether federal or state, to limit the use of pre-dispute employment arbitration agreements. “While there is no indication that the Texas legislature will seriously consider banning mandatory employment arbitration in Texas any time soon, the movement in other states to do so affects how multistate employers choose to proceed.”
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