There is a general belief that arbitration favors employers and large businesses. However, an important change in the law, backed by bipartisan support, has advanced employee rights significantly by increasing their access to courts for certain claims. Specifically, the new law affects an employer’s ability to enforce an arbitration agreement and handle sexual harassment/assault claims privately through arbitration.
On March 3, 2022, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”) into law. This law, which amends the Federal Arbitration Act, prohibits forced arbitration of sexual harassment and sexual assault claims.
Under the new statute, a litigant who brings a sexual harassment or sexual assault case will not be bound by an arbitration agreement or a waiver of a collective or class action that they entered into before the dispute arose. Specifically, the Act provides:
at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute 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.
Many have commented on the overall purpose of the Amendment. For example, one senator said that the law will ensure that the voices of sexual assault and sexual harassment survivors voices will not be silenced. The senator also noted that the law is narrow in scope and application and should not be the catalyst for destroying pre-dispute arbitration agreements in all employment matters.
This piece summarizes some of the key take aways from the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act:
The Alleged Victim Can Still Arbitrate: The person alleging sexual harassment or assault may still choose to enforce an arbitration agreement. However, it must be their choice, not the employers. Similarly, the parties may still agree to enter into an arbitration agreement after a dispute involving sexual harassment or sexual assault arises, and either party may enforce such an agreement without being blocked by the Act.
The Definition of Sexual Harassment: The Act defines “sexual harassment” as any conduct that is alleged to constitute sexual harassment as defined by federal, tribal, or state law. Under New York, New Jersey, and federal law, this includes all forms of gender-based or sexual harassment, whether or not it involves any sexual element. The Act also applies to allegations of sexual assault, which it defined as those involving an alleged non-consensual sexual act or sexual contact.
Application of Federal Law by a Court: Whether the Act applies must be decided under federal law, and must be decided by a court regardless of whether the arbitration agreement at issue states that such a determination must be made by an arbitrator.
Claims Affected: The Act applies to all disputes or claims involving sexual assault or harassment that arise on or after March 3, 2022, the date on which the law was enacted. This means that the Act will invalidate existing arbitration agreements (even those in pre-existing employment agreements) that otherwise would have required such claims to be brought in arbitration rather than in court.
Discrimination Claims Can Still be Arbitrated: The Act only applies to sexual harassment and sexual assault claims, not discrimination claims based on any other category, or discrimination based on sex. Similarly, the Act does not apply to harassment claims based on other protected categories, such as race or disability. Employers may still choose whether they want other forms of harassment to be subject to mandatory arbitration.
What Should You Do? If you have entered into an employment agreement that is effective prior to March 3, 2022, you should review it and determine (1) whether it contains an arbitration provision; (2) whether the arbitration provision expressly excludes any claims (specifically sexual harassment and sexual assault); (3) review the agreement with an attorney with whom you should discuss preparation of an amendment that will reflect the change in law.