Congress passed the Law ending forced arbitration in cases of sexual assault and sexual harassment, marking a milestone in the #MeToo movement. This legislation (which President Biden is expected to enact) will effectively end mandatory arbitration of sexual assault and harassment disputes. Employees will now have the choice of pursuing their claims in arbitration or in court.
If passed, the bill would amend the Federal Arbitration Act (“FAA”) and provide that “pre-dispute arbitration agreements” (i.e. “agreement[s] to arbitrate a dispute that had not yet arisen at the time the agreement was entered into”) and “pre-litigation joint action waivers” (i.e. agreements waiving the right “to participate in joint, class or collective actions…regarding a dispute that had not yet arisen at the time of the conclusion of the agreement”) may be invalidated and unenforceable at the discretion of the employee who raises allegations of sexual assault or sexual harassment. The legislation covers all complaints of harassment or sexual assault, whether they fall under federal, state or tribal law.
Therefore, if an employee signs an agreement to arbitrate employment-related claims and subsequently experiences conduct that they believe constitutes a “sexual assault dispute” or a “sexual harassment dispute” (as defined in the new law), the employee could unilaterally opt out of arbitration and choose to pursue the employee’s claims in court. Similarly, the employee can refuse a pre-litigation and initiate solidarity actions with other presumed victims of sexual assault or sexual harassment. Employees may choose to arbitrate sexual harassment and assault claims, however, provided the agreement to arbitrate occurs after the dispute arises and the employee agrees to arbitration in writing. Some employees may welcome the level of confidentiality that arbitration affords them as well as its efficiency and may choose to go that route.
Although the law was passed to address claims of sexual harassment and sexual assault by employees, employers should also understand that the broad language of this new law may make related claims or disputes also subject to the electoral option and , therefore, not subject to arbitration. For example, if an employee files a complaint of racial discrimination in addition to a complaint of sexual harassment, a court may allow both complaints to go to court; rather than requiring the employee to pursue the claims separately: one in court and one in arbitration, which may require future court resolution.
It is important to note that once signed, the effect of the legislation will be immediate and will apply to any pre-litigation agreements entered into before the bill’s enactment, potentially rendering existing binding arbitration clauses between parties invalid. employees and their employers for sexual harassment and sexual assault disputes. However, the retroactive effect of the legislation is only limited to cases where the claim has not yet arisen, meaning that if a claim has already accrued, arbitration would still need to take place. Further, any dispute as to whether an arbitration clause is prohibited by law will be decided by a court and not by an arbitrator, whether or not the agreement in question delegates such authority to an arbitrator.
Key takeaways and next steps
This development is significant. Employers should proactively review their agreements containing mandatory arbitration provisions, including those with class/class action waivers (including those that exist) for any revisions necessary for compliance in light of this law. For example, employers may consider revising their arbitration agreements to explicitly exclude all sexual harassment and sexual assault disputes in the same way that workers’ compensation claims are generally exempt or barred from arbitration. Employers should also consider how to communicate these changes to their workforce.
It also serves as an important reminder that employers should review and revise their existing policies, procedures and training programs prohibiting discrimination, harassment and retaliation in the workplace more generally and not just around sexual harassment, and train their workforce accordingly. Employers should strive to establish effective complaint or grievance processes, provide anti-harassment training to their managers and employees, and take immediate and appropriate action whenever an employee makes a complaint. Employers should also be aware that some state laws prohibit clauses in employment contracts that would otherwise prevent a person from disclosing sexual harassment, assault, or other related behavior in an effort to ensure such allegations come to light.
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