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A New York State trial court recently ruled that the arbitration clause in an employment contract requiring an employee to submit to binding arbitration for claims against her employer, including sexual harassment claims, was unenforceable following amendments to New York State’s Human Rights Law in 2018. The decision creates a split in authority between New York State and federal courts, following a 2019 decision in the Southern District of New York upholding the enforceability of arbitration agreements in employment contracts. That court found that the Federal Arbitration Act (FAA) preempts the New York statutory prohibition. These contrasting decisions may create uncertainty around the viability of employee/employer arbitration agreements in New York as they relate to harassment and discrimination claims.

IMG_2433-300x171This confusion exists in New Jersey as well. On March 18, 2019, Governor Murphy signed legislation that, among other things, prohibits mandatory arbitration of discrimination, retaliation or harassment claims as against public policy. While other jurisdictions, including New York, have enacted similar legislation pertaining to sexual harassment claims, the New Jersey law covers all claims arising under the New Jersey Law Against Discrimination (NJLAD). The New Jersey law also states that confidential settlement agreements “shall be deemed against public policy and unenforceable”. It is important to note that the prohibition of arbitration does not apply to collective bargaining agreements. It remains unclear whether New Jersey courts will find that this state law is preempted by the FAA, but nonetheless, employers run the risk of violating the new law if arbitration provisions are included in employment contracts going forward. The new law is not retroactive. It applies “to all contracts and agreements entered into, renewed, modified or amended on or after” March 18, 2019.

Since the signing of New Jersey’s law prohibiting the inclusion of arbitration agreements in employment contracts, New Jersey courts, both state and federal, have upheld the validity of arbitration clauses that were signed before enactment of the law.

A jury has found in favor of a former PNC Bank employee and awarded her damages $2.4 million is damages after finding she was victim of sexual harassment.  Damara Scott, a former wealth manager who worked at the PNC Bank branch in Glen Ridge, New Jersey, claimed in her lawsuit that a regular customer grabbed her and grinded into her buttocks.

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The incident concerning the alleged sexual assault took place on October 20, 2013.   Ms. Scott alleges that she was stalked by a well-known and regular customer, named Patrick Pignatello, who followed her to her car when she was attempting to leave work for the day.  Ms. Scott alleged that Mr. Pignatello proceeded to utter vulgar, sexist and racist insults and touched and grouped her from her behind.  Ms. Scott testified that Mr. Pignatello  stated to her, “No, I’m not following you.  I offer full services and I’m willing to please.”  She alleges he then pumped and grinded into her buttocks.  Ms. Scott claimed that she was able to get away from Mr. Pignatello and went to the back of her car to drop her on the trunk so she could try to fight him off.

At this time, the branch manager had informed one of the tellers that Mr. Pignatello had followed Ms. Scott to her car and ran out through emergency door towards Ms. Scott. The branch manager screamed to Ms. Scott, “Are you ok?  What did Pat do? Do you want me to call the police?”  Ms. Scott claims that she was so shocked and embarrassed she could not respond appropriately and told the branch manager that she just wanted to leave and then left.

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