Abstract

Excerpted From: Michael Z. Green, Expanding the Ban on Forced Arbitration to Race Claims, 72 University of Kansas Law Review 455 (March, 2024) (267 Footnotes) (Full Document)

Social movements have functioned as a last line of action in addressing access to justice when courts and legislatures have failed to consider concerns for those with less power in our society. Both the Black Lives Matter (“BLM”) and #MeToo movements have fostered broad social protests against mistreatment of persons based upon race and sex, respectively. These movements have offered unique perspectives when considering the enforcement of arbitration agreements purportedly being used as a powerful tool for corporate interests desiring to prevent employees and consumers of color and women from pursuing public vindication of their discrimination claims through the court system.

Pursuant to the Federal Arbitration Act (FAA), the United States Supreme Court has consistently enforced agreements to arbitrate, including standard form agreements between an individual consumer or employee, sometimes referred to as mandatory or forced arbitration. As a result, companies have used their bargaining power to require the use of arbitration instead of the courts to resolve disputes and also to obtain the waiver of class resolution of disputes in both arbitration and the courts. Without any objection to arbitration in general, most legislative efforts and creative legal challenges have attempted to, and primarily failed to, abolish forced arbitration by protecting statutory discrimination claims from being foisted out of the courts and into private resolution.

Only after the BLM and #MeToo protests have we started to see positive changes evolve in the effort to subvert the FAA legal “juggernaut” created by the Supreme Court's primarily unfettered approval of agreements to arbitrate. In the wake of these movements, recent surveys indicate that most people do not approve of mandatory arbitration agreements. These movements also led to the first major amendment to the FAA prohibiting mandatory arbitration for sex-based discrimination claims after nearly thirty years of failed legislative efforts seeking to ban mandatory arbitration.

On March 3, 2022, with bipartisan political support, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFASASHA”) that bans the use of forced arbitration to resolve sexual-assault and sexual-harassment-related conflicts. This legislation initially developed in part as a response to the #MeToo movement. When the Democratic House and Senate had the control to bring the legislation forward in Congress, and some Republicans ended up supporting the legislation, it became the law.

EFASASHA's ban does not address claims of racial harassment, racial assault, or any other discrimination claims brought by workers and consumers based on protected classes other than sex. The House of Representatives also passed the Forced Arbitration Injustice Repeal (“FAIR”) Act of 2022 (H.R. 963) on February 10, 2022, which would have covered racial discrimination claims by employees and consumers. The FAIR Act of 2022 would have banned not only mandatory arbitration of race discrimination claims but all “predispute arbitration agreements that force arbitration of future employment, consumer, antitrust, or civil rights disputes.” Unfortunately, the Senate never acted on this proposed law leaving any final action on the FAIR Act of 2022 languishing with a Senate committee. On April 27, 2023, Democratic Representative Hank Johnson and Democratic Senator Richard Blumenthal reintroduced the same legislation, now titled the FAIR Act of 2023.

In May 2023, Democratic Senator Corey Booker and Democratic Representative Colin Allred introduced legislation sponsored by them and other Democratic legislators, the Ending Forced Arbitration of Racial Discrimination Act (“EFARDA”) of 2023. If passed, EFARDA would ban forced arbitration of race discrimination claims. Unfortunately, because EFARDA only lists Democratic sponsors, its passage or any subsequent attempts in the near future to pass a specific legislative ban on forced arbitration for race discrimination appears unlikely. EFASASHA passed, in part, because it had bipartisan support from Democrats and Republicans including Senator Lindsey Graham. Shortly after EFARDA was introduced, Democratic Senators Dick Durbin and Kirsten Gillibrand introduced new legislation in June 2023, the Protecting Older Americans Act (“POAA”). Unlike EFARDA, the POAA has bipartisan support as Republican Representative Nancy Mace and Republican Senator Graham also sponsored that legislation.

One can only speculate why Graham, Mace, or other Republican legislators who supported EFASASHA to ban forced arbitration of sex discrimination claims and also the POAA's ban on forced arbitration of age discrimination claims have not yet been willing to support legislation banning mandatory arbitration of race discrimination claims as well. Possibly, there will continue to be a partisan divide on all matters regarding race whether at the federal or the state level. With only EFASASHA (and not FAIR and not likely EFARDA without bipartisan support) becoming law, this creates some uncertainty as to whether race discrimination claims brought by the same employee or consumer could be forced into arbitration while intertwining sex discrimination claims would have to be resolved in the courts.

Because EFASASHA requires that sexual assault or sexual harassment claims may not be forced into arbitration, allowing other claims related to or intertwined with the sexual assault or sexual harassment to be resolved separately in arbitration could affect the overall vindication of the sexual assault or sexual harassment claims in court as intended by EFASASHA. With piecemeal resolutions, employees and consumers could be subjected to issue preclusion and claim preclusion concerns as both res judicata doctrines could limit full recovery or create inconsistent recovery for those pursuing EFASASHA's nonarbitrable sexual assault or sexual harassment claims.

Given that many discrimination complaints involving both race and sex discrimination cannot be separated in a way that would allow vindication of the sex discrimination claim in court, as intended by EFASASHA, this Article argues that courts must resolve the race and sex discrimination claims together. Principles developed through the application of res judicata doctrines, including both claim and issue preclusion, require this result. The doctrine of claim preclusion “prevents a party from suing on a claim or cause of action that has or could have been determined by a competent court in a final and binding judgment.” Whereas, the doctrine of “[c]ollateral estoppel prevents relitigation of specific issues actually litigated and determined by a final judgment, where the issues were essential to the judgment.”

Further, that businesses continue to embrace their social responsibilities, while also demanding that race discrimination claims be arbitrated amidst so much public criticism over resolving sex discrimination claims in arbitration, suggests that any pragmatic response by those businesses should involve abolishing their arbitration agreements. If these businesses do not discontinue their pursuit of arbitration when dealing with claims for race discrimination, plaintiffs' firms have another option. These firms could pursue mass racial arbitration filings of multiple individual claims against a single business as a way to convince that business to decide that mandating arbitration for race discrimination claims is not a viable option. At a minimum, all these pressures and potential legislation should lead to the end of forced arbitration with respect to race discrimination claims and possibly all protected class discrimination claims.

This Article proceeds as follows. Section II highlights the nature of the problem that employees have faced for the last thirty years as businesses have been able to demand that individuals agree to arbitrate discrimination disputes as a condition of employment or a consumer transaction. Section III discusses EFASASHA, why its statutory prohibition on arbitrating sex discrimination claims was passed, and how employers may want to respond to it in light of key comments from those involved in the passage of the legislation. Section IV explores the concept of intersectional discrimination and how claims involving both race and sex should be regarded as one claim overall and joined with each other as related claims in resolving EFASASHA coverage issues.

Section V discusses the intertwining doctrine that arose in the 1980s to analyze and establish the necessary joinder of arbitrable and nonarbitrable claims, why the Supreme Court rejected this intertwining doctrine out of deference to the enforcement of agreements to arbitrate pursuant to the FAA, and how this intertwining doctrine might now be applied to prevent race discrimination claims arising from the same transaction as sex discrimination claims from being arbitrated. Section V also argues that the doctrines underlying res judicata support a finding for reversing the Court's prior rejection of the intertwining doctrine under the FAA. To presently allow the intertwining arbitrable and nonarbitrable claims to be resolved in a court as a result of EFASASHA when those claims involve both race and sex discrimination from the same transaction represents the correct approach. Section VI highlights the opportunities arising from the passage of EFASASHA to place pressure on businesses and employers to abandon forced arbitration policies for other forms of discrimination, especially race discrimination.

This Article concludes that companies should abandon any practices that would continue mandatory arbitration of claims based upon race when sex claims may not be arbitrated. Businesses should dismantle their mandatory arbitration of race discrimination practices to show they care about their broader social responsibilities in light of BLM related protests and calls for racial reckoning. These responses let employees and consumers know they will not have to arbitrate claims of discrimination based upon race when businesses must resolve similar claims of discrimination based upon sex in the courts after EFASASHA. This gives greater certainty when claims of race and sex discrimination may be inextricably intertwined.

[. . .]

Employers and companies now face an important window in resolving race discrimination disputes. EFASASHA clearly prohibits sex discrimination claims from being arbitrated without expressly prohibiting the forced arbitration of race discrimination claims. While Congress has not yet addressed this discrepancy, there appears to be no good rationale for businesses to continue to pursue mandatory arbitration of racial discrimination claims when EFASASHA prohibits mandatory arbitration of sex discrimination claims.

If all the concerns about being forced into private resolution via mandatory arbitration were justified in passing EFASASHA, then those same concerns still exist for race discrimination claims, too. Judges will need to address some of these matters as parties face procedural and judicial efficiency challenges to arbitration of claims based on race when joined with sex claims through court proceedings pursuant to EFASASHA. “A single suit serves ‘judicial economy, avoidance of piecemeal litigation, and overall convenience of the parties' better than fragmentary litigation about the same issues.” Because EFASASHA states that claims “related” to its covered sex claims must also be litigated, it will not be surprising to discover that many claims based on race that are also related to or intersect with EFASASHA claims will be litigated as well rather than forced into arbitration. Regardless of what the proponents of EFASASHA may have expected regarding the narrow scope of its coverage, this result of joining arbitrable race discrimination claims in court may likely occur and already has occurred with some of the initial cases addressing EFASASHA. Rather than still force the resolution of a racial discrimination claim in arbitration, courts should ignore this two-step around the litigation of the sex discrimination claims when the racial claims are arguably related.

More pragmatically, businesses should abolish their forced arbitration policies for all discrimination claims. Businesses should allow employees and consumers to proceed with both race and sex claims together in the court system. These businesses may even learn that any fears about large jury verdicts and excessive litigation costs via court resolution may prove to be irrational and unfounded. Employees and consumers may also find that some disputes may be better resolved through private processes including arbitration as long as they have the option to make that choice after a dispute arises.

EFASASHA has removed the option of mandatory arbitration for sex claims and sent a strong signal to business leaders that they should end forced arbitration for all discrimination claims, especially claims based upon race. Also, businesses should embrace the complete abolition of forced arbitration because public support for this form of arbitration is waning. These companies can lead the change even before all the stars align to mandate the abolition of forced arbitration for all discrimination claims through the passage of the FAIR Act or EFARDA or some other legislative action.

Many companies still considering the question of continuing race discrimination arbitration are also the same companies that made positive statements embracing BLM at the time of the George Floyd protests. Collective targeting of these businesses could demand they abandon forced arbitration of race discrimination claims as a step in demonstrating how they have not failed by merely making performative statements as a public showing without any real commitment to racial justice. Although social movements played a crucial role in passing EFASASHA to address forced arbitration of claims based upon sex, these movements have not yet resulted in any comprehensive and direct ban on forced arbitration for claims based upon race.

This Article asserted that no real basis exists to treat race claims any differently from sex claims when enforcing agreements to arbitrate against consumers or employees. With the passage of EFASASHA, sexual harassment and sexual assault claims have escaped the forced arbitration regime that the Supreme Court has heavily endorsed for thirty years in preventing so many individual employees and consumers from having their day in court. Unfortunately, discrimination claims brought by Black consumers and workers may still be forced into arbitration even after EFASASHA.

As attorneys representing employees and consumers become more creative in finding ways to circumvent forced arbitration clauses through mass racial arbitration and mass racial organizing, employers and businesses need to decide what the continued benefit would be in forcing arbitration of claims based on race when they may not insist upon the arbitration of claims based on sex. Rather than step around the sexual assault and sexual harassment claims to still pursue race claims in arbitration, employers and businesses should step back and think about the broader reputational dangers in treating race claims in a more differential manner. Regardless of how it occurs, the disparate dispute resolution processes based on race discrimination claims versus sex discrimination claims after EFASASHA must end. Employers and businesses should take the pragmatic approach to making this change to boost their reputations. Likewise, they can take the preemptive step of making this change before Congress passes additional legislation or mass racial arbitration or related mass racial organizing efforts demand such a change.

Professor of Law and Director, Workplace Law Program, Texas A&M University School of Law.