On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”). This was a bipartisan bill which amends the Federal Arbitration Act (the “FAA”) to now give employees who are parties to arbitration agreements with their employers the option of prosecuting a claim of sexual assault or sexual harassment either through arbitration or in court.
For years, many employers have used mandatory arbitration agreements for employment-related claims which were permissible and enforceable under the FAA. According to the White House, over 60 million American workers are currently subject to mandatory arbitration provisions. The purpose of the Act is to let employees with sexual-harassment or sexual assault claims decide how they wish to pursue their claims. The Act now allows victims to have the choice whether they wish to speak publicly about their experiences or if they choose to resolve their claims in a private arbitration setting.
What does the Act actually say? This new law amends the FAA to include a new section, which states, in part:
[A]t the election of the person alleging conduct constituting a sexual harassment dispute or a sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no pre-dispute arbitration agreement or pre-dispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
Employers should note that the Act defines sexual assault as a nonconsensual sexual act or sexual contact. Separately, sexual harassment can be defined by the following:
unwelcome sexual advances;
unwanted physical contact that is sexual in nature;
unwanted sexual attention, including unwanted sexual comments and propositions for sexual activity;
conditional professional, educational, consumer, health care, or long term benefits predicated on sexual activity; and
retaliation for rejecting unwanted sexual attention.
What do employers need to know about this new Act? Well first, the Act does not flat out prohibit parties from arbitrating their sexual harassment or sexual assault claims. Parties are still free to choose to arbitrate their claims. There are plenty of reasons why a party might prefer arbitration given that arbitration provides a more private and smaller forum as opposed to the very public court system. Additionally, parties may choose arbitration due to its confidential nature. The purpose of the Act is to allow the person alleging such conduct to have the option to choose to either arbitrate their claim or invoke the law and proceed in court, and to take away the employer’s control over the forum in which the dispute is heard.
Second, employers need to know which claims are covered by this Act. Employers must keep in mind that this new law applies to claims arising after the Act was enacted, even if the arbitration agreement was signed years ago. It is also important to note that in addition to individual claims, the Act invalidates class-action waivers for sexual assault and sexual harassment claims. However, current claims that are already pending are not subject to this law. Therefore, the pre-dispute agreement to require arbitration of those claims still remains enforceable. However, the new law does apply to all sexual harassment and sexual assault claims that arise or accrue after March 3, 2022.
Third, employers should note that the enforce-ability of an arbitration agreement or a class or collective action waiver must be determined by a court and not an arbitrator. This is also irrespective of whether the arbitration agreement purports to delegate that determination to an arbitrator. Thus, courts must decide whether a dispute is a covered sexual harassment or sexual assault claim. However, there is still uncertainty as to whether the Act is intended to permit all claims in a case involving a claim of sexual harassment or sexual assault to bypass mandatory arbitration. It is also unclear whether employees already subject to a mandatory arbitration provision who choose to pursue their sexual harassment claims or sexual assault claims in court, will still be required to arbitrate any other claims they may have. The Act is not clear whether an entire lawsuit that includes claims of sexual harassment or sexual assault, along with other commonly pled employment claims such as wrongful discharge and discrimination, must be prosecuted in court or if those other claims would still be subject the mandatory arbitration provision.
Fourth, employers must also be aware of state laws that purport to go further than this new federal law in limiting an employer’s ability to compel forced arbitration. New York, New Jersey and California have already passed laws prohibiting the use of mandatory pre-dispute arbitration for any employment-related discrimination, harassment or retaliation claim.
What does this mean for employers? The Act does not completely invalidate a mandatory arbitration clause just because its scope is broad enough to encompass a sexual harassment or sexual assault dispute. However, employers must still review their mandatory arbitration clauses and should consider possible revisions to carve out sexual harassment or sexual assault claims to minimize enforcement issues of the mandatory arbitration provision. It is important that when reviewing any workplace arbitration agreement that employers are working with HR or legal professionals to ensure that they are not restricting employees’ rights. While the agreement is meant to cover a change in venue from the court room to private arbitration, that agreement should not limit the claims an employee may file.
We encourage employers to review their mandatory arbitration provisions and PMP and SilvermanAcampora LLP are here to help employers ensure full compliance with this new federal law and any applicable state laws.