Claims That “Arise Out Of” An Employment Agreement: It May Be Broader (And More ‎Significant) Than You Think

| Andrew P. Torrez

Sexual discrimination claims continue to be big news in the world of suits by suits.  We’ve previously commented at some length regarding the novel issues raised in the sexual harassment lawsuit brought by former Kleiner Perkins partner Ellen Pao.

Today, we turn to a related and equally unique issue:  a sexual orientation claim brought under the auspices of the Americans With Disabilities Act, 42 U.S.C. § 1201 et seq.  Although there is no federal statute that protects employees from discrimination on the basis of sexual orientation generally, Brian Anthony Martinez, the former international managing director of television for Bloomberg Media, brought a lawsuit against his former employer in 2011, alleging that he was terminated after Bloomberg discovered that he had undergone therapy for domestic abuse from his male partner, thus (arguably) bringing his claims under the ADA.

We'll never know whether Martinez would have been successful in using the ADA as a vehicle to prosecute his sexual orientation discrimination claims, because a federal judge in New York has thrown out Martinez's lawsuit on entirely different grounds.

Specifically, Martinez relocated to Bloomberg's London office in 2005 and signed an employment agreement that contains a forum selection clause requiring him to litigate any claims “arising out of” the contract in London, under British law.  Martinez argued that his ADA sexual orientation-related claim did not “arise out of” his employment contract and thus could be brought in New York and under U.S. law.  Martinez also claimed that litigating his sexual discrimination claims in London would be prohibitively expensive.  Indeed, although Martinez initially brought a parallel lawsuit in London, he would ultimately drop that suit, citing cost considerations.

The New York Court was thus called upon to determine whether Martinez's ADA claims can be said to “arise out of” the employment agreement even though the underlying factual circumstances giving rise to the allegations -- seeking therapy -- occurred outside the workplace.  On Friday, August 10, U.S. District Judge Jesse M. Furman concluded that Martinez's claims arose out of his employment agreement, dismissing Martinez’s U.S. lawsuit.  Judge Furman concluded that “it is the agreement between Martinez and Bloomberg that, under English law, gives rise to his employment discrimination claims; in the absence of the agreement, he would not be able to bring such claims at all.”

Judge Furman’s opinion suggests that very few, if any, employment-related claims could be said to occur outside the scope of the employment agreement, which gives employers greater confidence that forum selection, choice-of-law, and arbitration clauses will cover prospective disputes with their employees.

This seemingly technical determination can have significant consequences for litigants.  As here, if a claim is deemed to arise out of an employee’s agreement, then the employer can generally control the forum and law that applies through mandatory forum and choice-of-law clauses in the employment contract.  Moreover, the employer can – and often does – specify in the employment contract that all disputes arising out of the agreement be resolved through arbitration rather than litigation.  For a plaintiff seeking to avoid his employer’s preferred choice of law, forum, and adjudicator, then, it can be critically important to characterize one’s claim as not arising from the employment agreement.  Judge Furman's opinion makes it more difficult for a plaintiff to win that argument.