Since the beginning of the #MeToo movement in October 2017, Congress and state and local lawmakers have introduced a series of laws aimed at eliminating sexual harassment and abuse in the workplace. As we explained in our June 2018 article, by mid-2019, over 125 bills had been introduced by states to eliminate workplace harassment. Many of these statutes and proposed laws have prohibited or limited the use of mandatory arbitration agreements for the resolution of sexual harassment and abuse claims.
However, many years prior to the #MeToo movement, Congress enacted the ‘Franken Amendment,’ which prohibits government departments and agencies from using Department of Defense appropriations for any contract in excess of $1 million, unless the contractor agrees not to require its employees to sign arbitration agreements and to take any action to enforce arbitration of claims under Title VII of the Civil Rights Act of 1964, or tort claims related to or arising out of sexual assault or harassment. Initially, it was thought that the Franken Amendment would (1) prohibit contractors from entering into employment agreements that would require arbitration of a covered claim, and (2) prohibit contractors from enforcing any such mandatory arbitration provisions in existing employment agreements.
However, courts are increasingly ruling that, by its plain language, the Franken Amendment does not prohibit contractors from entering into or enforcing mandatory arbitration provisions, it only prohibits certain federal departments and agencies from contracting with such contractors. Accordingly, the Franken Amendment is not a defense to arbitration. Lee v. Google Inc. is the most recent case to reach this conclusion. Lee, a former Google employee, alleged disparate impact discrimination on behalf of a putative class of female Google employees who were required to arbitrate sexual harassment claims, in addition to several individual claims relating to and arising out of alleged sexual harassment. Lee had signed an arbitration agreement and Google moved to compel arbitration. Lee argued that the Franken Amendment prevented Google, as a defense contractor, from compelling arbitration of the former employee’s sexual harassment claims. However, the court rejected Lee’s argument, holding that the Franken Amendment does not establish a defense to arbitration.
The Lee court cited to Ashford v. PricewaterhouseCoopers, LLP, a 2018 case where the United States District Court for the District of South Carolina reasoned that “the Franken Amendment does not prohibit employers from mandating arbitration of Title VII claims. It, instead, prohibits certain government entities from entering certain types of contracts with entities that require employees to agree to arbitrate certain claims as a condition of employment (either by entering new contracts mandating arbitration of such claims or enforcing existing provisions).” Following this reasoning, the Lee court ruled that the Franken Amendment “does not provide that arbitration provisions executed or enforced in violation of [the Franken Amendment] are void, nor does it establish a remedy for violations in favor of employees.” Accordingly, the Lee court granted Google’s petition to compel arbitration.
In response to the Franken Amendment, many defense contractors and subcontractors modified their arbitration agreements and contracts to carve out sexual harassment claims. Although such a modification may be necessary to secure a defense contract covered by the amendment, it appears that Courts at least have been unwilling to invalidate arbitration agreements of contractors that do not include such carve outs. Although other avenues for relief may be available to prospective claimants, it appears that the Franken Amendment alone will not protect them from mandatory arbitration provisions. However, as explained in our article in the June 2018 edition of OFCCP Digest, in response to the #MeToo movement, numerous states and localities have adopted or are considering laws that prohibit the mandatory arbitration of sexual harassment provisions. It is critical that all contractors monitor these developments to ensure that their arbitration agreements comply with these new laws.