Second Federal Judge Refuses to Apply CPLR 7515’s Ban on Arbitration of Discrimination Claims

New York CPLR Section 7515, passed in 2018, prohibits mandatory arbitration of “any allegation or claim of discrimination.”  Last week, Chief Judge Colleen McMahon of the United States District Court for the Southern District of New York became the second federal judge to conclude that this state ban on arbitration of discrimination claims contravenes the Federal Arbitration Act (“FAA”), and granted an employer’s motion to compel arbitration of a former employee’s claims alleging race and gender discrimination.

In Whyte v. WeWork Companies, Inc., a former employee filed a lawsuit alleging race and gender discrimination, retaliation, and equal pay violations against WeWork.  In response, the company moved, pursuant to the FAA, to compel arbitration in front of JAMS of all claims, pursuant to an arbitration agreement between the parties.  The plaintiff resisted WeWork’s request to arbitrate, arguing that CPLR 7515 “carves out” discrimination claims from those she could be ordered to arbitrate pursuant to the arbitration agreement she executed with the company.

Noting that the FAA limits the grounds for setting aside an agreement to arbitrate to those that “exist at law or in equity for the revocation of any contract,” the court concluded that CPLR 7515 contravenes the FAA because it singles out a “specific type of claim” in contrast to “generally applicable contrast defenses” such as unconscionability or duress.  The court also relied upon the Supreme Court’s 2008 decision in AT&T Mobility v. Concepcion, which stated that when “state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward:  The conflicting rule is displaced by the FAA.”  As such, because CPLR 7515 purports to prohibit the arbitration of a particular type of claim, it is “displaced by the FAA.”

The decision in WeWork follows, and employs the same general reasoning, as the 2019 decision of Southern District Judge Denise Cote in Latif v. Morgan Stanley & Co., LLC.  There, Judge Cote held that CPLR 7515 could not block Morgan Stanley from enforcing a mandatory arbitration agreement with one of its employees who filed a lawsuit in court alleging sexual harassment.

In sum, while CPLR 7515 remains in place, employers now have guidance from at least two federal courts as to the viability of prohibitions on arbitration of discrimination claims.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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