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New York State Court Issues Groundbreaking Decision Nullifying an Arbitration Agreement in a Sexual Harassment Case

On July 10, 2020, Justice Luis L. Nock issued an order denying a motion to compel arbitration in a sexual harassment case. Behind this dry description lies a groundbreaking decision that represents a significant crack in the wall that many employers have built trying to keep employment discrimination cases from a jury.

The case, Newton v. LMVH Moët Hennessy Louis Vuitton Inc., 2020 N.Y. Misc. LEXIS 3288 (Sup. Ct. N.Y. Cty. July 10, 2020), involved a woman working in New York City who alleged that she was sexually harassed by senior managers and retaliated against when she complained. After she started a lawsuit, the company moved to compel arbitration, relying on an arbitration agreement she had signed years earlier.

While such motions have been increasingly rubber-stamped, Justice Nock denied the motion to compel arbitration. The court cited the 2018 New York State Law (CPLR §7515) that prohibited using mandatory arbitration clauses in employment agreements to compel arbitration of discrimination claims. The court noted the State’s “profound” and “well-defined and dominant public policy . . . against sexual harassment in the workplace,” rendering mandatory arbitration agreements “null and void” in such claims. To summarize, the court’s findings were as follows:

  • Given the strong public policy against sexual harassment, it is up to the court – not an arbitrator – to determine if an arbitration agreement is enforceable.
  • The Federal Arbitration Act of 1925 (“the FAA”), which usually requires arbitration in most cases, did not apply because sexual harassment cannot possibly be considered “interstate commerce.”
  • The NY State legislature did not intend for its law to be “preempted from the moment of its inception, by the FAA.”
  • The 2018 Law applied retroactively to agreements signed before the law went into effect.
  • The company had nullified its own policy mandating arbitration by changing the policies in its handbook after the 2018 Law took effect.

Justice Nock’s decision will likely be reviewed by many other trial and appellate courts. However, this case represents a striking stake in the ground, affirming New York State’s belief that juries – and not arbitrators – should decide cases of sexual harassment and discrimination.

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