In June, when the SEC approved the NASD's rule change exempting discrimination and sexual harassment complaints from its mandatory arbitration requirement, SEC Chairman Arthur Levitt Jr. urged other SROs to "promptly change their rules to conform to those of the NASD." The NYSE didn't disappoint him.
The exchange filed its own rule change in September that went well beyond the NASD's action. Under the new NYSE rule, which was still awaiting approval by the SEC as of Dec. 14, the exchange will allow discrimination and harassment complaints to be arbitrated in its forums only if the parties agreed to arbitrate the dispute after the fact.
The NASD still allows firms to use so-called predispute agreements to force discrimination and harassment claims in to arbitration. Since the NYSE will no longer hear claims under such agreements, any firm that wants to maintain the status quo will have to specify arbitration at the NASD in a private agreement between the firm and its employee.
Meanwhile, as of early December, the NASD was still working on a second rule change dealing with promised "enhancements" to its employment arbitration program. Linda Fienberg, NASDR executive vice president for dispute resolution, says the proposed changes will soon be filed with the SEC.
One issue likely to be addressed is the problem of "bifurcated" claims. These cases could occur when discrimination cases are filed in court, while related claims such as wrongful termination and defamation are still bound to arbitration. NASD officials said in an October press release that the SRO enhancement package would deal with bifurcated claims by allowing "the employer or another respondent ... the option to combine all claims in court." The release said nothing about employees having the same right, so presumably that won't be in the rule filing.
The NYSE's rule change allows either party the option of consolidating all claims in one forum. The exchange actually wanted to eliminate mandatory arbitration of discrimination and sexual harassment in 1994, according to Cliff Palefsky, a San Francisco attorney with the National Employment Lawyers Association. The Big Board went so far as to draft a prospective rule change, but backed down under pressure from its members, Palefsky says.