Despite NY law to the contrary, Second Circuit upholds mandatory arbitration clause

In 2018, New York lawmakers passed legislation prohibiting the mandatory arbitration of sexual harassment claims. They amended the law in 2019 to prohibit the mandatory arbitration of all other discrimination claims. The U.S. 2nd Circuit Court of Appeals (which covers New York) recently issued an important finding: The state law prohibiting arbitration is preempted by the Federal Arbitration Act (FAA). Read on to understand how the decision may affect your company’s dispute resolution policies.

Facts

In May 2016, Fox News Channel, LLC initiated an arbitration against Andrea K. Tantaros, whom the company employed as a political commentator, alleging she had breached her employment agreement by publishing a book without prior approval. The agreement contained a so-called mandatory arbitration clause. In August 2016, Tantaros filed a complaint against the company and senior executives in New York Supreme Court, alleging sexual harassment, hostile work environment, tortious interference with business expectancy, and retaliation for her harassment complaints.

In February 2017, the supreme court granted Fox’s request to compel arbitration of the sexual harassment claims. On April 10, 2018, the legislature amended Civil Practice Law and Rule (CPLR) Section 7515 to prohibit the arbitration of a sexual harassment claim.