By:  Ty Hyderally, Esq., Jennifer Vorih, Esq., and Isaac Lee.

Most lawsuits do not ever go to trial, let alone reach a verdict. In fact, according to a study by Duke University School of Law, less than one percent of all federal civil cases are ever resolved by trial.[1] Indeed, some cases involving employee discrimination and sexual harassment that should be heard before a jury never even make it to the stage of being filed as a lawsuit, as many employers commonly include a forced arbitration agreements in their hiring contracts to mitigate the public scrutiny of a lawsuit. However, following the #MeToo movement, legislators appear to be joining the public sentiment against silencing victims in the workplace. A recent court case in New Jersey is in the spotlight and could have a powerful impact on employee rights regarding forced arbitration.

In March 2019, New Jersey lawmakers amended the New Jersey Law Against Discrimination (LAD). The amendment, Section 12.7, was to prohibit forced arbitration clauses waiving “any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment.”[2] Unfortunately, shortly thereafter, the United States District Court for the District of New Jersey struck down Section 12.7 as unconstitutional in N.J. Civil Justice Inst. v. Grewal, holding that the Federal Arbitration Act (FAA) preempted state legislation banning forced arbitration. However, on March 3, 2022, President Joe Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, which amended the FAA to prohibit pre-dispute arbitration agreements regarding sexual harassment and assault claims.

On May 25, 2022, Essex County Superior Court Judge Jeffrey B. Beacham considered Section 12.7 of the LAD in Sellino v. Galiher, ESX-L-8519-21 (N.J. Super. Ct. May 25, 2022). The transcript of oral argument on Defendants’ Motion to Dismiss and Compel Arbitration can be found here: https://images.law.com/contrib/content/uploads/documents/399/81052/Sellino-v.-GaliherManshel-052522.pdf (Tr. of Mot.). The Plaintiff, Paddy Sellino, sued her former boss John Galiher and employer Bay Grove Capital Group LLC, after enduring twenty-four years of workplace sexual assault and harassment. The defendants argued that—because she had supposedly electronically signed an arbitration agreement in 2019—Ms. Sellino had consented to arbitration. Judge Beacham disagreed, holding that the defendants failed to prove that Ms. Sellino knowingly agreed to arbitrate any disputes with the defendants related to her employment. Judge Beacham explained that, even though the arbitration agreement contained Ms. Sellino’s electronic signature, there was “no evidence that plaintiff accessed the arbitration agreement … in order to execute the electronic signature.” (Tr. of Mot. 49, 15-17.) Further, the agreement contained five lines for executing the agreement, which were blank. Also, as Ms. Sellino’s counsel pointed out, defendants told Ms. Sellino that they needed her to sign the document so that they could process her payroll, rather than explaining that by signing she would be giving up her right to sue defendants. (Tr. of Mot. 34, 6-11.) Finally, Judge Beacham cited to the recent passage of the Ending Force Arbitration of Sexual Assault and Sexual Harassment Act of 2021, indicating that Congress intended to prevent forced arbitration of sexual assault and sexual harassment cases, and thus the FAA no longer preempts Section 12.7 in such cases. (Tr. of Mot. 47, 2-14.)

This case is a win not only for Paddy Sellino – but for all New Jersey employees subjected to sexual harassment and sexual assault in the workplace. Employers are no longer able to deprive these employees of their day in court. This empowering wave of change is also occurring at a national level. In Congress, the SPEAK OUT Act (H.R. 8227) was recently introduced by a bipartisan group of Representatives, which would prohibit the enforcement of pre-dispute nondisclosure agreements pertaining to sexual misconduct in the workplace. Similarly, in the Senate, a bipartisan co-sponsored companion bill of the SPEAK OUT Act (S.4524) was introduced on July 13, 2022. With support from Democratic and Republican leaders in both Houses of Congress, it is likely both bills will be passed and signed into law, codifying the right of all employees to sue in cases of workplace sexual harassment and assault.

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[1] Jeffrey Smith & Grant MacQueen, Going, Going, But Not Quite Gone: Trials Continue to Decline in Federal and State Courts. Does it Matter?, 101 Bolch Jud. Inst. Duke L. School 4, (2017).

[2] N.J. Stat. Ann. § 10:5-12.7.