A decision handed down by Essex County Superior Court Judge Jeffrey Beacham has upended previous decisions regarding New Jersey’s statutory ban on mandatory arbitration of sexual harassment claims, opening the door to the possibility of public jury trials pitting victims against their employers.

At issue was whether the Federal Arbitration Act (FAA) preempted a New Jersey state law that banned mandatory arbitration of sexual harassment claims. Generally speaking, state laws are deemed invalid if they conflict with federal laws, as federal law is considered to be superior and preemptive.  Several New Jersey courts have been asked to weigh in on whether Section 12.7 of the New Jersey Law Against Discrimination (NJLAD) – which indicates that employment contracts compelling arbitration and waiving procedural rights in discrimination or harassment cases are unenforceable – was preempted by the FAA. They have consistently decided that they are.

However, since those decisions were made, Congress passed and President Biden signed an amendment to the FAA called the Ending Forced Arbitration of Sexual Assault and Sexual Act. The amendment specifically prevented courts throughout the country from enforcing mandatory arbitration clauses within discrimination and sexual harassment cases.

In light of the amendment, a New Jersey woman who had sued her former boss and employer claiming over two decades of sexual assault and harassment fought back against their argument that the FAA compelled her to pursue arbitration. Though defendants John Galiher and Bay Grove Capital Group LLC asserted that Paddy Sellino had electronically signed a mandatory arbitration agreement in 2019 and that the earlier version of the FAA applied, Ms. Sellino’s attorney argued that preemption was not appropriate because the amendment made clear that it was Congress’ intent that arbitration not be compelled.

In handing down his decision, Judge Beacham agreed with the victim, stating that the FAA no longer preempted Section 12.7 of the NJLAD. He noted that the essential question that needed to be answered was what Congress’ purpose was in crafting the amendment, and he said that it was a clear reversal of federal policy reflecting a distaste for arbitration agreements in state sexual harassment cases. He determined that Section 12.7 was controlling law and that Galiher and the company could not force Ms. Sellino to participate in arbitration.

The judge’s decision not only frees Ms. Sellino to pursue her case under New Jersey’s Law Against Discrimination. It also makes clear that future victims of discrimination or sexual harassment in New Jersey will be free to exercise their procedural rights and to have their cases heard by juries.

If you have been a victim of workplace sexual harassment or discrimination, don’t let anybody bully you into arbitration. For information on your rights and options, contact our employment attorneys today.