New proposal to curb sexual harassment may run afoul of federal law

SACRAMENTO — State lawmakers came back to the Capitol this month under pressure to pass legislation to help victims of sexual harassment.

Yet after two weeks in session, most of the ideas are still in the planning phase. Legislators face the task of crafting a bill that not only could pass but which can withstand potential court challenges.

Legislators have floated three main ideas so far: banning secret settlements in harassment cases, banning the use of arbitration clauses in such cases, and changing the legal standard for proving harassment in civil cases.

Only the first idea has made it into bill form so far. SB 820 would declare void any provision “that prevents the disclosure of factual information” in sexual harassment, assault or discrimination cases, with the goal of preventing serial harassers from hiding behind confidentiality. The bill is co-sponsored by the Consumer Attorneys of California and the California Women’s Law Center.

Of the three ideas, SB 820 may have the easiest legal path. State law already makes confidentiality agreements unenforceable if they involve elder abuse or felony charges of sexual assault or rape.

Assemblywoman Lorena Gonzalez Fletcher, D-San Diego, has announced she will introduce a package of bills to fight workplace harassment. The most talked about idea was a proposal to bar the use of forced arbitration when an employee alleges workplace sexual harassment.

Democrats, the consumer attorneys and other groups have long pushed bills that would limit the use of arbitration agreements — usually with little success.

But this dam cracked last year when the fake account scandal at Wells Fargo & Company helped the consumer attorneys push through SB 33. The so-called “Wells Fargo bill” bars the enforcement of arbitration clauses when fraud is alleged.

At hearings, California Chamber of Commerce lobbyist Jennifer Barrera repeatedly warned SB 33 could violate the Federal Arbitration Act and could be subject to legal challenges. This is a 1925 law that limits the ability of states to legislate on arbitration agreements when interstate commerce is involved.

Reached Friday, a spokesperson for the chamber declined to comment on any of the new proposals on harassment, saying they had not yet had a chance to review them.

“There is a serious effort to design a bill that will protect victims of sexual harassment with an approach that will avoid any preemption issues,” said Cliff Palefsky, a partner with McGuinn, Hillsman & Palefsky APC in San Francisco, who has been consulting with legislators on crafting the bill.

“We are also confident the governor feels very strongly about the issues of sexual harassment and discrimination,” he added.

One of the key ideas behind SB 33 was that an arbitration contract is voided when the customer didn’t actually agree to, for instance, open a fraudulent account, said Brian S. Kabateck, managing partner with Kabateck Brown Kellner LLP in Los Angeles and a former president of Consumer Attorneys of California.

“We’re not talking about a contract, we’re taking about using a contract to bootstrap a new relationship,” Kabateck said. “If any dispute has to go to arbitration, that’s using a valid contract to create a phony contract.”

Because it involves employment, Gonzalez Fletcher’s bill would involve the Private Attorneys General Act, the California law which authorizes employees to recover damages on behalf of themselves, others like them and the state.

California courts have largely held PAGA claims are insulated against the Federal Arbitration Act. But a series of recent federal court decisions have found circumstances in which PAGA claims could be forced into arbitration.

The last idea — changing the burden of proof in civil harassment cases — was the subject of a Senate Judiciary Committee hearing last week.

While there is not yet a specific proposal on the table, the hearing took on the idea of changing the current standard that requires a plaintiff to prove “severe or pervasive” harassment. Plaintiffs’ attorneys have long argued this standard is difficult to meet, leading to low success rates in court even when they say there are credible claims.

The hearing looked at alternate standards from Los Angeles County and New York City. New York’s standard is considered the broadest in the country, stating in part that harassment is behavior that goes beyond “petty slights and trivial inconveniences.”

This standard makes it easier to prove cases that “do not involve actual physical or sexual assault,” said New York City Human Rights Commissioner Carmelyn Malalis. She testified at the hearing via closed-circuit television. “Courts have routinely dismissed cases where plaintiffs alleged unwanted sexual overtures or touching, propositions and other behavior as not reaching the level of severe and pervasive.”

But employers are likely to oppose significant changes to the standard, testified David J. Reis, head of the labor and employment practice at Arnold & Porter Kaye Scholer LLP. He characterized the problem largely as a failure to enforce the law.

“In my view, the problem is not the current legal standard for sexual harassment,” Ries said. “All the reported conduct we have been reading about involves behavior that is well past the legal line and far exceeds the current standards.”