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December 04, 2019 Practice Points

Michigan Court Refuses Arbitration of Sexual Harassment Claim

What a court views as “unimaginable” is not much of a guiding legal principle.

By Mitchell L. Marinello

In Lichon vs. Michael Morse and Michael J. Morse, PC, No 339972 (March 14, 2019) 327 Mich. App. 375, the Michigan Court of Appeals refused to send a sexual harassment case to arbitration.  The decision reveals that it is based on the court’s view that, as a matter of public policy, sexual harassment cases should not be arbitrated.

Samantha Lichon was a receptionist at the Morse law firm. She complained that Michael Morse, the firm’s founder and controlling partner, sexually harassed her by repeatedly making sexual suggestions to her, groping her, and pressing his body against hers. These actions took place while she was at work and also at social functions sponsored by the firm, such as the firm holiday party.

When she was hired, Lichon signed an arbitration agreement that read in pertinent part as follows:

This Mandatory Dispute Resolution Procedure shall apply to all concerns you have over the application or interpretation of the Firm’s Policies and Procedures relative to your employment, including, but not limited to, any disagreements regarding discipline, termination, discrimination or violation of other state or federal employment or labor laws. . . . This Procedure includes any claim against another employee of the Firm for violation of the Firm’s Policies, discriminatory conduct or violation of other state or federal employment or labor laws. . . . .

The only exceptions to the scope of this Mandatory Dispute Resolution Procedure shall be for questions that may arise under the Firm’s insurance or benefit programs . . . While this Procedure does not prohibit the right of an employee to file a charge with the Equal Employment Opportunity Commission (“EEOC”) or a state civil rights agency, it would apply to any claims for damages you might claim under federal or state civil rights laws. . . .  

Lichon said that she filed a complaint with the human resources department at the Morse firm but that no action was taken, and the harassment continued. Eventually, her employment was terminated allegedly for poor professional performance. She filed suit for violation of Michigan’s Civil Rights Act and for various other state-based claims. The Morse firm moved to compel arbitration.

The trial court granted the firm’s motion to compel arbitration, but the appellate court reversed in a 2-1 decision. In essence, it held that sexual assault and battery at the workplace is not related to employment and therefore was not covered by the parties’ arbitration agreement:

. . . The fact that the sexual assaults would not have occurred but for Lichon’s and Smits’s employment with the Morse firm does not provide a sufficient nexus between the terms of the [arbitration agreement] and the sexual assaults allegedly perpetrated by Morse. . . . Furthermore, under no circumstances could sexual assault be a foreseeable consequence of employment in a law firm.

. . . . This issue, whether the sexual assault and battery of an employee at the hands of a superior is conduct related to employment, is an issue of first impression in Michigan. Although the parties have provided extensive authority in support of their respective positions, . . . none is directly on point. We therefore note that central to our conclusion in this matter is the strong public policy that no individual should be forced to arbitrate his or her claims of sexual assault. Though we acknowledge that “[t]he general policy of this State is favorable to arbitration[,]”. . . the idea that two parties would knowingly and voluntarily agree to arbitrate a dispute over such an egregious and possibly criminal act is unimaginable. . . . The effect of allowing defendants to enforce [the arbitration agreement] under the facts of this case would effectively perpetuate a culture that silences victims of sexual assault and allows abusers to quietly settle these claims behind an arbitrator’s closed door. Such a result has no place in Michigan law.

There is a national debate being held about whether employers should be permitted to require employees to sign arbitration agreements as a condition of employment. Proposals for changing existing law include outlawing employment arbitration agreements altogether, exempting sex harassment and other civil rights claims from such agreements, and giving employees the right to opt out of arbitration agreements for a certain time period after they start work or even after a dispute has arisen. On the other side of the issue, arbitration proponents point to arbitration programs that employers offer as an employee benefit, with the employer paying all the arbitration expenses, the assertion that employees usually prefer to have their disputes resolved privately, and the time and cost savings that arbitration offers when compared to courts of law. 

What seems clear, however, is that the piecemeal handling of this issue through inconsistent judicial decisions is less than ideal, particularly when such decisions are based on nebulous notions of public policy that subject the courts to accusations of political bias. Like it or not, the U.S. Supreme Court has ruled that, under the Federal Arbitration Act, states are not permitted to exempt particular types of claims from arbitration. AT &T Mobility v. Concepcion, 563 U.S. 333, 341 (2011).  The Lichon decision would seem to fly in the face of that.

Moreover, it seems fair to note that law firms are places of work, like any other. If, as we know, sexual harassment can take place at a school, library, business office, nursing home, or place of worship, it is hard to understand why it would not be “foreseeable” that sexual harassment could also take place in a law firm. Similarly, the court’s statement that it is “unimaginable” that, at the inception of an employment relationship, people would agree to arbitrate all employment claims, including any claims of sexual harassment, seems too facile. What a court views as “unimaginable” is not much of a guiding legal principle.  

Mitchell L. Marinello is a partner at Novack and Macey LLP in Chicago, Illinois.

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