Recently, Congress passed a bill targeted at ending mandatory arbitration for sexual assault or sexual harassment claims. Many businesses attempt to control the cost and exposure of a jury trial by requiring pre-dispute resolution arbitration agreements as a condition of employment. In response to arguments that such agreements can act as a "gag" or a form of silencing, Congress determined that employees who are subjected to sexual harassment and assault should have the right to pursue their claim in court. On February 10, 2022, the U.S. Senate passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (H.R. 4445). Just days before that, the U.S. House of Representatives approved the same measure with bipartisan support. President Biden is expected to sign this bill into law. The legislation will take effect immediately and applies to all existing arbitration agreements, even those signed prior to the bill’s enactment.
The legislation amends the Federal Arbitration Act to bar pre-dispute arbitration provisions (those contractual agreements entered into before the occurrence of the alleged sexual assault or harassment), but does not apply to agreements to arbitrate reached after a dispute arises. As a result, employees will have the right to choose whether to proceed in court or arbitration. Prior to this legislation, employers could require employees to arbitrate these claims regardless of whether the employee wished to pursue their claims in court, so this is a significant change in the employment litigation arena.
Additionally, the bill includes a prohibition against any waivers of the right to bring sexual assault and sexual harassment claims jointly or on a class action basis. Previously signed mandatory arbitration agreements and class action waivers will be unenforceable regarding these types of claims once the bill becomes law.
The bill does not affect the arbitration of disputes that do not involve allegations of sexual harassment or sexual assault. It also does not apply to claims based on gender discrimination or other forms of discrimination (but there are many advocates pushing for such legislation). As a result, there will inevitably be instances in which some asserted claims are subject to arbitration and some are not and this will complicate litigation and increase the cost if claims are bifurcated and pursued in arbitration and separately in court. In instances in which an employer attempts to enforce a mandatory arbitration agreement and takes the position that the employee’s claim is not a sexual assault or sexual harassment claim, it will be a judge—and not an arbitrator—who will make that determination.
Employers should review their mandatory arbitration agreements and class action waivers for any needed revisions. At a minimum, employers should ensure that their arbitration agreements include language that carves out non-arbitrable claims under federal law.
If you need assistance in reviewing your employee agreements, or for general advice and guidance on navigating this new legislation, please do not hesitate to contact the employment law team at Farleigh Wada Witt.
