NY Mandatory Arbitration Agreements Seem to Be Holding Up

Federal Laws Take Precedence Over New NY State Law

Mandatory arbitration agreements have recently born the brunt of hostility in New York. However, the aggressive sentiment against them does not seem to be changing the outcome. The NY State legislature passed a statute in 2018 (§7515 of the CPLR) to limit mandatory arbitration for certain legal situations. The statute made mandatory arbitration “null and void” for sexual harassment claims. In fact, the legislature amended the statute in October 19, to prohibit mandatory arbitration in all discrimination claims, not just sexual harassment.

The Federal Courts Have Ruled in Favor of Arbitration Agreements

Despite the New York legislature’s efforts, federal courts have ruled that the Federal Arbitration Act (FAA) preempts New York’s state law. According to the New York Law Journal, the federal district court in Latin v. Morgan Stanley & Co. allowed the employer to compel the sexual harassment complainant to arbitration. The court based its ruling on the FAA.

In addition, the U.S. Supreme Court ruled similarly in the case Epic Sys. v. Lewis, 138 S. Ct. 1612 (2018)). It permitted arbitration based on federal law.

Why Do Most Employers Prefer Arbitration?

The use of mandatory arbitration has grown in the United States. Research done by the Economic Policy Institute on mandatory arbitration indicates that in such arbitrations, employers usually come out on top.

While only about 2 percent of employers used arbitration in 1992, today the number is greater than 55 percent. Large companies in particular are likely to have mandatory arbitration clauses in their employment contracts.

In addition to favoring the employer, arbitration is also cost-effective. It is a less formal legal proceeding than courtroom litigation. Employers can resolve disputed issues more quickly and with less expense.

Stephen Hans & Associates has extensive experience working with employers in all areas of employment. We can answer your legal questions and also help you as a business owner to comply with regulations and resolve employment disputes.


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