Sexual Harassment Consequences: Arbitration, Civil Penalties, And Third Party Claims

Comprehensive Guidance on Sexual Harassment  - Beverly Grant Law Firm, P.S.

Accusations of sexual harassment are never to be taken lightly, and there are many penalties and procedures in place to punish both the perpetrators…and the companies that allow it to occur or fail to stop it. This article provides a closer look at not only the consequences of failing to intervene, but also what employers may and may not do to dictate the resolution of sexual harassment claims in the work place. It discusses:

➢ The limits of using arbitration agreements to address sexual harassment claims.

➢ What punitive damages you might face for sexual harassment lawsuits.

➢ Where third-party actions and questions of gender identity fall on your liability.

Can Employers Use Arbitration Agreements To Address Sexual Harassment Claims? And What Are The Implications Of Such Agreements?

Signing an arbitration agreement is a serious commitment for an employee, and employees often do not understand what arbitration is, or what they have given up, when they sign it.

Arbitration agreements are papers many employers will have their employees sign before their work begins. They might state that the employee cannot sue them in court, or in front of a jury, for questions of discrimination (including sexual harassment). However, Arbitration Agreements do not give a company carte blanche to do whatever they want afterward without consequence. Courts can be selective about what they choose to enforce, if they believe an agreement to be unfair.

“Arbitration” is a way of resolving legal disputes without going to court, by letting a trained legal professional or panel of professionals decide the outcome after evidence is presented and legal arguments are made. It is similar to going to court, except that the process is privatized. Using this private process means that the parties give up certain rights, such as open access to the courthouse and a right to a trial by jury.

The Washington State constitution guarantees the rights of Washingtonians to a trial by jury, even for civil cases. Wash. Const. Art. I §21. However, it is possible to waive a constitutional right. “An employer can condition employment upon the employee waiving his right to a jury trial and voluntarily signing an arbitration agreement.” Mayne v. Monaco Enters., Inc., 191 Wn. App. 113, ¶21, 122, 361 P.3d 264 (2015) (emphasis in original). If an employee’s waiver of the right to a jury trial is not “knowing, voluntary, and intelligent” then the arbitration agreement may be attacked as “procedurally unconscionable” and “void.” Id.

Because of this, it has become common practice for businesses to include language in their arbitration contracts indicating that the employee has had the opportunity to review the terms of the agreement with an attorney, if they choose, and employers often provide the employee with several weeks to look through and consider whether they truly wish to sign the arbitration agreement.

Courts once ruled consistently in favor of employees in such dilemmas. Many years ago, courts were suspicious of arbitration agreements, believing that they provided unfair advantages to employers and imposed unmanageable burdens on employees. The Court also reasoned that employees often do not have equal bargaining power with an employer who offers them a job. The employee gets a stack of papers at the last minute; they just want a job. Employees often don't even read them. They just sign the paperwork, not knowing the full ramifications of what will happen later. Courts routinely disfavored arbitration agreements and struck them down.

This led the United States Congress to pass the Federal Arbitration Act. The pendulum swung in the opposite direction, and many Courts, including the Ninth Circuit, began to recognize a “policy favoring arbitration” because it alleviated a strain on judicial resources, and recognized the parties’ rights to freely enter into contracts without worry that a court would declare their agreements to be illegal. Citing to those supposed “policies,” Courts across the nation began imposing extra hurdles and procedural burdens on employees who try to avoid an arbitration clause that they had signed.

In 2022, however, the pendulum began to return to center. The United States Supreme Court decided Morgan v. Sundance, Inc., which overturned years of case law in the Ninth Circuit and declared that “The policy is to make ‘arbitration agreements as enforceable as other contracts, but not more so.’ … Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation… If an ordinary procedural rule – whether of waiver or forfeiture or what-have-you – would counsel against enforcement of an arbitration contract, then so be it. The federal policy is about treating arbitration contracts like all others, not about fostering arbitration.” Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1713, 212 L. Ed. 2d 753 (2022) (citations omitted).

In Washington State, arbitration agreements are sometimes subject to attack from employees who claim that the agreements are either “substantively unconscionable” meaning that the terms of the agreement are so unfair that they would shock the reader’s conscience, or “procedurally unconscionable” meaning that the way the agreement is presented is fundamentally unfair to the party with less bargaining power – typically the employee. More and more frequently however, Courts have said that they are going to uphold arbitration agreements in sexual harassment cases.

If you are an employee and you have experienced sexual harassment at work, review your personnel file to determine whether you have signed an arbitration agreement. It can affect your rights and your legal recourse.

What Restrictions Do Employers Have on Agreements Made With Employees In The State Of Washington?

One such protection in Washington is the Older Workers Benefit Protection Act. If the employee is over 40, they must be given twenty-one days to review a severance agreement. Older workers must be allowed to have their independent attorney review the agreement and clearly understand the ramifications of signing that agreement. They are even allowed to revoke the agreement within seven days after they have signed it.

With respect to arbitration, due process provisions are also required to be in arbitration agreements to be held as viable arbitration agreements. Employers cannot just hand an employee a stack of papers, ask them to sign it, and not have in bold letters or somewhere on the face of the agreement, “I have fully read this agreement; I understand that I can have an independent attorney of my choosing review this agreement before I sign it.” or language of a similar effect.

The courts have been trying to enforce the fairness of these types of agreements. They will look at the wording of the agreements, the circumstances in which those agreements were signed, and whether or not employees had an opportunity to clearly understand the agreement before they sign it.

Recent legislation in Washington also makes it illegal for employers to require employees “not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal, or common law to be illegal discrimination, illegal harassment, illegal retaliation… or sexual assault.” RCW 49.44.211. This new law applies to any agreement between an employer and an employee. One historical advantage of arbitration to companies has been a requirement that employees keep their grievances confidential and non-public. Washington Statutes now prohibit a company from using confidentiality clauses in arbitration agreements to silence victims of workplace sexual harassment.

Arbitration agreements in the Ninth Circuit also generally cannot restrict or eliminate a sexual harassment victim’s right to file with the Equal Employment Opportunity Commission (EEOC). Certain limits also exist around requiring an employee to waive their right to participate in a class action lawsuit.

In any case, it is best practice to assume that anything you sign will be enforceable. It is very important to read what you sign, and if you don't understand what you've signed, to immediately go to an attorney to have them decipher it to see if there are any time restrictions in which you can rescind the agreement and which you have to decide whether or not you want to sign the agreement.

All of that litigation has been going back and forth on these types of arbitration agreements, and right now, the courts are leaning toward the employer and not the employee.

What Are The Potential Civil Penalties For Individuals Engaging In Sexual Harassment In The Workplace?

Sexual harassment cases, unlike criminal actions such as assault, are considered civil, and the exact penalties will depend on your state.

In California, for example, the jury is allowed to award punitive damages or liquidated damages to punish the employer for what they did or failed to do to protect the employee from a hostile working environment and sexual discrimination or harassment.

In the state of Washington, on the other hand, punitive damages are not allowed under the general statute but might depend on which court you pursue the claim. In federal court, the number of employees that an employer has determines the amount of damages that can be determined or granted in federal court.

In federal court, no matter what state you're in, an employee who shows that they were the victim of malicious discriminatory practices or that the employer showed reckless indifference to discriminatory practices can recover punitive damages. 42 U.S.C. §1981a. There is a $300,000 cap for punitive damages for an employer that has 300 or more employees, $200,000 if it's 200 or more employees, and a $100,000 cap if it's a hundred or a smaller number of employees. In state court, punitive damages are not awarded. Therefore, that is an important distinction when considering what court to file in.

How Else Will Which Court The Action Is Filed In Shape The Potential Repercussions Of A Sexual Harassment Case?

Under the Civil Rights Act, discrimination statutes can award victims in federal court additional punitive damages. It all depends upon the nature of the actions, which court you pursue, and what claims you pursue.

In federal court, if you want a jury trial, you can have a 6, 9, or 12-person jury, and the jury has to come back with a unanimous verdict. If one person disagrees with your argument, you lose. It's over. In state court, at least in Washington, you only have to have 10 of the 12 people agree. 10 of the 12 jurors have to agree and then come to a verdict.

These nuances and distinctions can make a big difference in whether you're successful in a case or not. Usually, when you go to federal court, you want to make sure you have a very strong case because you have to have everyone agree with the argument.

Does The Law Address Third-Party Sexual Harassment Such As Harassment By Clients, Customers, Or Vendors?

Employers and employees are not the only ones that can perpetrate sexual harassment in the workplace. For instance, if someone is working for a company with a Xerox machine, and a repairman starts sexually harassing an employee, the employee is allowed to bring that complaint to the attention of their employer.

It is then the employer’s job to notify the Xerox company and explain the nature of what occurred to them. Employers have the duty and responsibility to take that complaint seriously, to convey to the third-party vendor what has occurred, and to take affirmative steps to ensure that it does not occur again.

How Does Sexual Orientation, Gender Identity, And Gender Expression Factor Into Sexual Harassment Protections Under The Law?

Sexual orientation, gender identity, and gender expressions are all protected by the same laws. If an employee is treated differently because of their sexual orientation, it can create a hostile work environment for them. It could, for example, be considered an adverse employment action to retaliate against them by pointing them out, in a way that is inconsistent with how employers treat other employees.

If you are unsure how to treat an employee or what protections they are legally entitled to, consulting with an experienced attorney is always the best step. Not only will one be able to guide you through this situation, but they can help you avoid any problems and liability in the future. For more information on Arbitration Agreements In Sexual Harassment Claims, an initial consultation is your next best step.

For more information on Arbitration Agreements In Sexual Harassment Claims, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (253) 300-0457 today.

Beverly Grant Law Firm, P.S. - Steilacoom, WA

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