New Federal Law Restricts Enforcement of Arbitration Agreements for Sexual Assault and Sexual Harassment Claims

Labor & Employment @lert

Date: March 22, 2022

On March 3, 2022, President Biden signed into law the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (the “Act”). The Act amends the Federal Arbitration Act (FAA) and allows employees alleging sexual assault or sexual harassment to avoid enforcement of arbitration agreements and class action waivers relating to such claims. This means that millions of employees may now choose to pursue sexual assault and sexual harassment claims in court and/or as a class, even if they previously agreed to arbitrate such claims on an individual basis. This development will significantly impact the forum in which these types of employment disputes are resolved.

Key Provisions of the Act

Courts have long viewed arbitration as a favored mechanism of dispute resolution, and arbitration provisions have become a common feature in many employment contracts. The Act, inspired by the #MeToo movement, aims to limit the reach of mandatory arbitration agreements by giving employees the option to pursue sexual assault and sexual harassment claims in court rather than an arbitral forum.

  • Employers Cannot Mandate Arbitration. The Act amends the FAA to provide that mandatory pre-dispute arbitration agreements may be invalidated at the election of an employee alleging sexual assault or sexual harassment. Employers therefore cannot require employees to arbitrate sexual assault and sexual harassment claims, but employees may voluntarily elect to arbitrate such claims after a dispute arises.
  • Class Action Waivers Are Voidable. The Act also provides that pre-dispute waivers of the right to bring sexual assault or sexual harassment claims on a class or collective basis are voidable at the election of the class representative alleging the conduct. In other words, employers cannot preclude employees from pursuing sexual assault or sexual harassment claims on a class or collective basis in any forum.
  • Partial Retroactive Application. The Act applies to any dispute or claim that “arises or accrues” on or after March 3, 2022. Although the Act could operate to invalidate agreements entered into prior to the law’s enactment, the Act does not apply retroactively to claims that arose prior to March 3, 2022.
  • Arbitrability Questions Are Decided by Courts. Courts—not arbitrators—will decide all disputes concerning the Act’s applicability, even if the underlying agreement purports to delegate such authority to an arbitrator. This is a departure from Supreme Court jurisprudence, which generally permits parties to delegate such decisions to an arbitrator.
  • Litigation Regarding the Act’s Scope Is Likely. It remains to be seen how courts will apply the Act in cases involving multiple causes of action (e.g., cases involving claims of discrimination in addition to a claim of sexual harassment). The Act applies “with respect to a case” which “relates” to a sexual assault or sexual harassment dispute. Courts may interpret the Act to broadly bar employers from compelling arbitration of any claim asserted in any lawsuit that includes a claim of sexual assault or sexual harassment. Alternatively, courts could permit employers to compel arbitration of those claims other than sexual assault or sexual harassment in a multi-count action. The ambiguity is likely to spawn litigation and could lead to bifurcation of claims with employers defending claims in two fora. Questions may also arise where claims are asserted against both the company and an individual employee.
Practical Considerations for Employers
  • Employers should anticipate an uptick in sexual assault and sexual harassment claims filed in court as employees seek to avoid having their cases sent to arbitration.
  • Employers should review existing arbitration agreements and consider whether revisions are warranted in light of the Act.
  • Employers should continue to monitor developments impacting arbitration agreements in the employment context. The Biden administration has signaled support for legislation that would more broadly preclude mandatory arbitration of employment-related claims, and there are similar efforts underway at the state level.
  • Employers should ensure they have sound workplace harassment policies and practices, including regular anti-harassment training, to reduce exposure to harassment claims and better position themselves to defend against such claims.
FOR MORE INFORMATION

For more information, please contact:

Nancy M. Barnes
216.566.5578
Nancy.Barnes@ThompsonHine.com

Todd M. Seaman
614.469.3257
Todd.Seaman@ThompsonHine.com

or any other member of our Labor & Employment group.

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