July 2024
Arbitration agreement deemed inapplicable where plaintiff plausibly alleged sexual harassment claim
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 ( “EFAA”) amended the Federal Arbitration Act to prohibit arbitration of sexual harassment and sexual assault claims. It also invalidated pre-dispute arbitration agreements with respect to such cases unless the claimant voluntarily elects arbitration to resolve such disputes.
On July 8, 2024, a Southern District of New York court held in Riggs v. Akamai Technologies that a plaintiff is not required “to ‘style’ her claims as a sexual harassment complaint” to bring claims outside a pre-dispute arbitration agreement under the EFAA). “[R]ather, it is sufficient that – looking at the underlying substance of the allegations – the plaintiff states a claim for sexual harassment that is plausible on its face.”
In Riggs, a female sales employee sued her employer, claiming she was subjected to a sex-based hostile work environment and disparate treatment from her male colleagues in violation of federal, state and city anti-discrimination laws. The employer moved to compel arbitration, arguing her claims fell within the scope of the arbitration agreement she signed when she began her employment. The employer acknowledged that the EFAA would invalidate the arbitration agreement if the plaintiff’s case “related to” a sexual harassment dispute, but argued she failed to allege a plausible sexual harassment claim because her complaint only generally characterized the claims as “discrimination” and “retaliation.”
The court disagreed with the employer, holding that the employee’s factual allegations related significantly to allegations of harassing conduct and, therefore, could not be compelled to arbitration under the EFAA.
S&K Take: The court’s holding is consistent with our prior report that no “magic words” are required for an employee to invoke the protections of the EFAA. When evaluating arbitrability, courts will look beyond the form of the complaint and evaluate whether the alleged conduct plausibly sets forth a claim for sexual harassment in substance. However, the court in Riggs did acknowledge—but left unanswered—the question of “whether the case could escape the arbitration clause even if the sexual harassment claim were not pleaded sufficiently.”
Former general counsel must testify about discrimination she experienced or witnessed
In Mitura v. Finco Services, Inc. et al, the plaintiff, a former employee, subpoenaed her employer’s former general counsel hoping that the general counsel would corroborate allegations of discrimination and harassment by their employer. The basis of the subpoena was the plaintiff’s allegation that she and the general counsel were the only two women in management and that she had often confided in the general counsel about her discriminatory experiences at the fintech company.
The employer moved to quash the subpoena. The court ruled partially in the employer’s favor, permitting the employee to question the general counsel, but limiting the scope of the general counsel’s testimony. Specifically, the court held that the former general counsel could be compelled to testify about topics that implicated her role as an employee but not as general counsel. Such topics would include, said the court, any discrimination the general counsel experienced personally or witnessed, “including reports and complaints she may have received informally and outside of her role as counsel.” However, the court declined to permit the employee to seek information regarding “whether [the employer] responded to employee complaints with effective investigations or other preventive actions,” as the latter implicated her role as former general counsel and was privileged.
S&K Take: This case highlights limitations on the attorney-client privilege, particularly as it applies to in house counsel who may wear several “hats.” Information will not be privileged merely because of in-house counsel’s involvement.
CFPB warns broad confidentiality agreements may violate whistleblower law
The Consumer Financial Protection Bureau (“CFPB”) cautioned in a circular that employee confidentiality agreements that do not clearly contain carveouts permitting communications with government enforcement agencies or cooperation with law enforcement investigations risk violating Section 1057 of the Consumer Financial Protection Act, which provides anti-retaliation protections for whistleblowing activity to the CFPB or other federal, state or local law enforcement agencies. The CFPB warned that such agreements could be improper where an employee perceives they would suffer adverse consequences for engaging whistleblowing activity, even if the agreement does not explicitly prohibit it. Further, the circumstances under which an agreement is provided may heighten this perception; for example, when an employee participates in an internal investigation of possible wrongdoing and simultaneously is presented with a confidentiality agreement, the CFPB warned there is a heightened risk they reasonably would view the requirement to sign “as a threat by the employer to take adverse action if the employee were to engage in whistleblowing activity.”
S&K Take: The CFPB’s guidance reflects a growing focus among federal regulators on what they view as overbroad confidentiality agreements that could deter employee whistleblowing activity. The CFPB noted that it views whistleblower protections broadly, and likened it to similar whistleblower protection statutes reflecting this understanding, including, as we previously reported, the U.S. Securities and Exchange Commission’s recent enforcement of Rule 21F-17 as well as the U.S. Commodity Futures Trading Commission’s enforcement of the Commodity Exchange Act and accompanying regulations.
