March 07, 2022

New Law Prohibiting the Mandatory Arbitration of Sexual Harassment and Assault Claims Goes Into Effect

On March 3, 2022, President Joe Biden signed the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (the Act) into law. Upon signing the bill, which had bipartisan Congressional support, President Biden proclaimed, “[w]hen it comes to sexual harassment and assault, forced arbitration shielded perpetrators, silenced survivors, enabled employers to sweep episodes of sexual assault harassment under the rug and it kept survivors from knowing if others have experienced the same thing in the same workplace, at the hands of the same person.”

The Act amends the Federal Arbitration Act to provide that, at the election of the person asserting a claim, no mandatory arbitration agreement “shall be valid or enforceable with respect to a case … [that] relates to [a] sexual assault dispute or [a] sexual harassment dispute.” A “sexual assault dispute” is defined as a dispute involving a “nonconsensual sexual act or sexual contact,” as such terms are defined in the federal sexual abuse criminal statute or any similar state law. A “sexual harassment dispute” is defined as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal or State law.”

The Act applies to any “case” – rather than a “claim” – that relates to a sexual harassment or assault dispute. This raises the question, to be later answered, of whether the Act will sweep up other types of employment claims when brought together with a sexual harassment or assault claim, allowing a plaintiff to except a broader range of claims from arbitration and bring them together in court as part of the same case. If not, employers will be faced with a decision of whether to litigate the sexual harassment claim in court while arbitrating the other claims.

As President Biden recognized at the bill signing, the Act does not automatically render invalid a prior agreement to arbitrate. However, it does give alleged sexual harassment or assault victims the ability to nullify a prior election to arbitrate a sexual harassment or assault claim, and they are free to proceed directly in court with those claims. Also noteworthy is the fact that the Act on its face is not limited to employment-related claims, and thus may apply to sexual harassment and assault claims brought by independent contractors, where they have the right to bring such claims (e.g., New York, California).

The Act goes into effect immediately, even as to previously executed arbitration agreements and waivers, and thus applies to any future claims. Therefore, at a minimum, employers should not attempt to compel arbitration of sexual harassment and assault-related claims brought by an employee in court, even under a prior agreement to arbitrate. Additionally, employers would be wise to review their arbitration policies and agreements to ensure that, going forward, provisions establishing mandatory arbitration of employment-related claims exclude matters that, under applicable law, are not subject to arbitration or which, at the individual’s election, may be excluded from arbitration. Employers seeking to keep these types of claims out of court will want to focus on pre-suit options, such as the enhanced use of non-binding mediation programs.

The Act is part of a growing trend to eliminate or narrow mandatory workplace arbitration agreements. For example, in 2019, California enacted a law that essentially bans mandatory arbitration agreements and prohibits employers from requiring any applicant for employment or any employee to waive any right, forum, or procedure for any violation of the California Fair Employment and Housing Act or other California employment-related statute, such as the Labor Code. The California law was scheduled to take effect on January 1, 2020, but the U.S. District Court for the Eastern District of California issued a preliminary injunction enjoining the statute’s enforcement. In September 2021, a divided three-judge panel of the Ninth Circuit Court of Appeals vacated the preliminary injunction against enforcement, and upheld California’s prohibition against mandatory arbitration agreements. The matter is currently on appeal en banc before the Ninth Circuit.

On the federal level, efforts are underway to expand the prohibition against mandatory arbitration to all forms of unlawful discrimination, harassment and retaliation claims under Title VII, the ADEA, the ADA and other employment-related laws. We can also expect additional state law restrictions on the mandatory arbitration of state law claims. We will continue to provide updates as developments occur.

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