Page 10 - Litigation

S10 | MONDAY, NOVEMBER 14, 2016 | Litigation | NYLJ.COM
Arbitration of Workplace Sexual Harassment
BY MARTIN S. HYMAN AND MATTHEW C. DALY
Arbitration clauses are prevalent in employment agreements. Typically, however, an of cer or manager of a com- pany will not be a party to other employees’ employment agreements with the company, and oftentimes arbitration clauses in employ- ment agreements do not expressly state that they apply to claims asserted against of cers or managers, as opposed to claims between the parties to the agreement (i.e., claims between the company and the signatory employee). Workplace sexual harassment or discrimination claims, however, often are asserted against senior employees personally, whether in conjunction with claims against
MARTIN S. HYMAN is a partner, and MATTHEW C. DALY is an associate, at Golenbock Eiseman Assor Bell & Peskoe. The authors, together with Nancy Erika Smith and Neil Mullin of Smith Mullin PC, were co-counsel for former Fox News host Gretchen Carlson in her lawsuit against Fox News’ former chairman and CEO Roger Ailes.
the company or not.1 When an of cer or man- ager is sued by an employee, he or she may seek the bene t of the company’s arbitration agreement with the employee. The case law under the Federal Arbitration Act is murky, however, concerning the extent to which a non-signatory senior employee may enforce the company’s arbitration clause for claims of sexual harassment or discrimination, particu- larly if the company is not a party to the suit.2
Arbitration is a creature of contract, and the general rule is that a party cannot be compelled to arbitrate a dispute he or she did not agree to arbitrate. Non-signatory senior employees who are sued for sexual harass- ment or discrimination, however, often seek to rely on an agency theory as an exception to this general rule. In the leading Second Circuit case in which the court held that non-signatory defendants could enforce an arbitration agreement, Roby v. Corporation of Lloyd’s, the court stated that “[c]ourts in this and other circuits consistently have held that employees or disclosed agents of an entity that is a party to an arbitration agreement are protected by that agreement.”3 But the case law is more nuanced than how it is painted by this broad statement.
Roby was based on unique facts that did not involve sexual harassment or discrimina- tion claims. In Roby, the non-signatory defen- dants were individual members of entities that managed Lloyd’s insurance underwriting syn- dicates. Certain investors sued the syndicates and the managing entities for federal securi- ties violations and civil RICO, and the inves- tors sued individual members of the managing entities based on “controlling person” liability under §15 of the Securities Act and §20 of the Securities Exchange Act. The Second Circuit held that the individual members (referred to as “Chairs”) could enforce the arbitration clauses in agreements between the manag- ing entities (referred to as “Agents”) and the investor-plaintiffs because “[t]he complaints against the individual Chairs are completely dependent on the complaints against the Agents.”4 The court described the claims against the Chairs as alleging “derivative misconduct.”5
Roby does not t squarely within the work- place sexual harassment or discrimination context because a sexual harassment or dis- crimination claim against the individual who perpetrated the alleged misconduct is not “completely dependent” on or “derivative”
of a claim against the employer. Rather, it is typically the employer’s liability, if any, that is derivative of the employee’s misconduct in the sexual harassment or discrimination context. Additionally, 15 years after Roby, the Second Circuit indicated that Roby was not premised on an “agency” theory at all. In Ross v. American Express, the court stated that where “a non-signatory moves to com- pel arbitration with a signatory, it remains an open question in this Circuit whether the non-signatory may proceed upon any theory other than estoppel.”6 The Second Circuit has de ned the “estoppel” theory as involving a situation where “‘the issues the non-signatory is seeking to resolve in arbitration are inter- twined with the agreement that the estopped party has signed.’”7 The “estoppel” theory also does not t squarely within the typical workplace sexual harassment or discrimina- tion context, because sexual harassment or discrimination claims usually do not rely on any terms of, and in fact exist independently of, the employment agreement containing the arbitration clause.8
Following Roby, the agency theory has been applied by two New York courts to permit non-signatory senior employees to
And Discrimination Claims Senior employees may not be covered by their company’s agreements.
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