The SEC announced June 23 that it had approved the NASDRs proposed rule change that will exempt discrimination and sexual harassment complaints from the NASDRs mandatory arbitration requirement. (See the RR special section on employment arbitration, Page 72.)
However, firms still will be able to force employees into arbitration. In its rule filing, the NASD said it would take no position on whether firms should be allowed to substitute private, predispute contracts that mandate arbitration at the NASDR or another SRO such as the NYSE.
But the Equal Employment Opportunity Commission (EEOC) sent a lengthy comment letter to the SEC stating its view that predispute agreements to arbitrate discrimination and sexual harassment complaints are intrinsically unfair and a violation of Title VII of the federal code.
Last August, when the NASDR proposed the rule change, the NASD promised that enhanced disclosure would be made to industry employees to make it clear to them that they have a choice as to whether to give up their rights to go to court. The wording of those disclosures has yet to be released. Nor is it clear how the NASDR intends to prevent current or prospective employees from being coerced into signing private arbitration agreements if they want to get, or keep, a job.
The NASDRs new rule will take effect on Jan. 1, 1999. All employment claims other than statutory discrimination and harassment claims will still be bound to arbitration.
In granting the six-month delay, the SEC noted that Jan. 1 was sufficient time for members of the industry to take action so that employees of member firms of other SROs will not be required to arbitrate these claims under the rules of the other SROs, the SEC said in a statement.
The NYSE shortly thereafter confirmed that it would be considering a parallel rule change at its September board meeting.
Some firms have acted already. As part of its proposed settlement of a sexual harassment class-action case, Merrill Lynch is letting employees pursue harassment and discrimination claims in court. But Smith Barney earlier this year issued an employee handbook it is asking employees to sign that, among other things, requires all disputes to be arbitrated at the NYSE.