If you have ever signed an employment agreement that says all disputes must go to arbitration, you are not alone. Many New Jersey workers sign these clauses on day one, then learn about them only after something goes wrong at work. A new published decision from the New Jersey Appellate Division makes one point much clearer for employees: when you bring a viable sexual harassment claim, you should be able to keep your entire case in court, and not just the harassment claim.
The Takeaway
In McDermott v. Guaranteed Rate, Inc., the Appellate Division held that the federal Ending Forced Arbitration of Sexual Assault and Harassment Act (EFAA), can make a pre-dispute arbitration agreement unenforceable for the whole case, as long as the case includes a viable claim involving sexual harassment or sexual assault. In other words, an employer may not be able to force you to split your claims, with part of your lawsuit in court and the rest in private arbitration, if your case includes a properly pled sexual harassment claim.
This was a matter of first impression in New Jersey, meaning New Jersey appellate courts had not previously issued a published decision on the scope of the EFAA in this context.
What Happened in the Two Cases the Court Decided Together
The court issued one published opinion covering two separate workplace cases that raised the same core issue.
In the first case, the employee, Megan McDermott, alleged she experienced sexual harassment and gender-based discrimination while working for a mortgage company. She also asserted additional claims tied to her employment relationship.
The trial court allowed her claims relating to sexual harassment to stay in court, but sent her other claims to arbitration.
In the second case, the employee, Geraldine Rivera-Santana, alleged a hostile work environment involving sexual harassment, along with pregnancy-related allegations including retaliation and failure to accommodate. The trial court kept the sexual harassment-based claim in court but ordered that her other claims had to decided in arbitration because it viewed them as arising from a different set of facts.
The Appellate Division rejected the split-the-case approach, and ruled that once the EFAA applies, it can apply to the entire case.
Why This Matters If You Signed an Arbitration Agreement
Arbitration clauses often change the playing field. Arbitration is private. The rules can be different than in court. The ability to appeal typically is very limited. There is no right to a jury trial. Many employees understandably feel that being forced out of court, especially in a sexual harassment case, can make it harder for them to be heard.
This Appellate Division’s opinion gives employees more leverage when sexual harassment is part of their story. If you have a case with multiple claims that all stem from your employment, and one of those claims relates to sexual harassment or sexual assault, then the court’s decision supports keeping everything together in one public court case, instead of forcing you to fight on two separate tracks.
There Are Important Limits to Know
This decision is powerful, but there a few things to keep in mind. First, most courts have concluded that the EFAA applies only to disputes or claims that arose or accrued on or after March 3, 2022.
Second, you still need a viable sexual harassment or sexual assault claim, or a related claim such as retaliation for reporting sexual harassment. Courts can dismiss claims that are not adequately pled, and employers may try to argue that a harassment allegation was added only to avoid arbitration.
What You Should Do if This Sounds Like Your Situation
If you believe your employer is trying to force your case into arbitration, the details matter, including what your agreement says, what happened and when, and how your claims fit together under New Jersey law and the EFAA. It is also important to act quickly because waiting can limit your options.
A few practical steps can help you protect yourself right away.
- Save the documents you already have, including your offer letter, arbitration agreement, handbook acknowledgments, pay records, and key emails or messages.
- Prepare a timeline while it is still fresh, including dates, witnesses, and how the conduct affected your work.
- Avoid signing a separation or release paperwork without understanding what rights you are giving up.
Those steps are not a substitute for legal advice, but they can preserve facts that often become critical later.
Jonathan Nirenberg’s Connection to This Decision
I had the honor of submitting an amicus (friend of the court) brief in support of Ms. Rivera-Santana appeal, and to participate in the oral argument, on behalf of the National Employment Lawyer’s Association of New Jersey (NELA-NJ). That work reflects our firm’s commitment to protecting employees’ rights when serious workplace misconduct is at issue.
Talk With a New Jersey Employment Lawyer About Forced Arbitration and Sexual Harassment Claims
If you experienced sexual harassment at work and your employer is pointing to an arbitration clause to keep your case out of court, you deserve a clear answer about what the law allows and what your next move should be. To speak with a New Jersey employment lawyer at Rabner Baumgart Ben-Asher & Nirenberg, P.C., contact us online or call (201) 777-2250 to schedule an initial consultation. We represent individuals throughout New Jersey and offer consultations in person, by phone, and by Zoom.