Key Highlights:
- The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act prohibits enforcement of a mandatory arbitration agreement with respect to sexual assault and sexual harassment claims.
- The Act amends the FAA and gives claimants the option to invalidate pre-dispute arbitration agreements and class waivers with respect to claims for sexual assault and sexual harassment.
- Several aspects of the Act are likely to give rise to litigation, including whether an employee can bring claims based on alleged acts that occurred before March 3, 2022 and the meaning of the phrase “with respect to a case.”
- In-house counsel should consult with outside counsel who focuses on arbitration agreements and class action waivers to determine (1) whether to implement a new arbitration agreement; or (2) whether to revise existing arbitration agreements.
On March 3, 2022, US President Joe Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act into law. The Act prohibits enforcement of a mandatory arbitration agreement with respect to sexual assault and sexual harassment claims.
The full impact of the Act remains to be seen (and likely will lead to significant litigation in the coming years), but in-house counsel can prepare for some of the potential implications.
History
Arbitration has long been some employers’ preferred forum for resolving workplace disputes. Proponents of employment arbitration claim it is faster and more efficient than proceeding in court. Arbitration also allows the parties to resolve disputes more privately and in a less formal and potentially less adversarial and risky context than jury trials. The US Supreme Court repeatedly has enforced arbitration agreements in the employment context since the passage of the Federal Arbitration Act (FAA) in 1925.
In the wake of the #MeToo movement, mandatory arbitration of sexual assault and harassment claims came under fire.
Opponents of mandatory arbitration of sexual assault and harassment claims maintain that because arbitration is more confidential than court litigation – there is no public record. Arbitration allows employers to conceal pervasive harassment cultures and prevent employees, particularly those who are victims of sexual harassment, from publicly exposing their wrongdoers, filing joint actions, or otherwise effectively vindicating their rights.
They further maintain that, when they enter arbitration agreements (typically at the outset of employment), employees lack bargaining power, and are forced to accept mandatory arbitration agreements without fully understanding the ramifications.
Finally, they maintain that arbitration outcomes generally favor employers and limited appeal rights make it difficult to rectify improper arbitrator decisions.
Some US states have enacted or proposed legislation curbing the use of arbitration agreements for sexual harassment or other employment claims. Thus far, California, Illinois, Maryland, New Jersey, New York, Vermont, and Washington have enacted such laws. These state laws currently remain vulnerable to invalidation on FAA preemption grounds, except with respect to sexual assault and sexual harassment claims.
The Act in a Nutshell
The Act amends the FAA and gives claimants the option to invalidate pre-dispute arbitration agreements and class waivers with respect to claims for sexual assault and sexual harassment. In effect, an employer can no longer compel an employee to arbitrate a sexual assault or sexual harassment claim, even if that employee signed a mandatory arbitration agreement at the time of hire. In addition, courts will decide whether an arbitration agreement is enforceable under the Act, even if the agreement calls for the arbitrator to resolve enforceability issues.
Importantly, the Act does not prohibit parties from agreeing to arbitrate sexual assault or sexual harassment claims after the employee has asserted the claim. It also does not prohibit pre-dispute mediation provisions or jury waivers that are not tied to an arbitration clause. Finally, it does not affect any claims currently in litigation or arbitration.
Other Potential Implications
Several aspects of the Act are likely to give rise to litigation. For instance, the Act applies to disputes that arise or accrue on or after March 3, 2022. This means the Act applies to agreements signed before March 3, 2022. However, the Act provides no guidance on when a claim “arises or accrues.” The question of whether an employee can bring claims based on alleged acts that occurred before March 3, 2022, remains an open question.
In addition, the Act broadly defines its applicability as being “with respect to a case” that relates to sexual assault or sexual harassment. This vague language could mean that all employment law claims brought with sexual assault or sexual harassment claims must proceed in court, or it could mean that employers can continue to compel arbitration of other employment claims.
Legislative history shows that Congress intended the latter, but claimants, nevertheless, may insert sexual assault and harassment claims into other employment law claims in an attempt to evade arbitration. The Act also arguably opens the door to class claims in arbitration, depending on how the agreement is drafted, with employees electing to invoke the arbitration provision but reject the class waiver.
Practical Considerations
In-house counsel should consult with outside counsel who focuses on arbitration agreements and class action waivers to determine (1) whether to implement a new arbitration agreement; or (2) whether to revise existing arbitration agreements.
Considerations include whether to carve out sexual harassment and sexual assault claims from any arbitration agreement and whether to include a separate jury waiver in locations where permissible.
Authors: Stephanie Adler-Paindiris, Samia Kirmani, Stephanie Lewis and Robert Gignilliat, Jackson Lewis P.C
Check out additional resources:
1. EEOC Sexual Harassment (last visited May 19, 2022).
2. Analysis: Forced Arbitration Law Raises New Questions (2022), Denis Demblowski, Francis Boustany, Preston Brewer, Grace Maral Burnett, Erin Webb.
3. President Biden Signs Law Limited Arbitration Agreements for Sexual Assault, Harassment Claims (2022), Samia M. Kirmani, Scott P. Jang, William Robert Gignilliat, IV, and Corey Donovan Tracey.
4. Top Ten Lessons for Employers from the Cuomo Report
5. Proposed Reforms to Tackle Sexual Harassment
Find more resources in the ACC Resource Library
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