Federal Arbitration Act Amended to Prohibit Mandatory Arbitration Agreements for Sexual Assault and Sexual Harassment Claims

robind Business, EmploymentLaw

Effective March 3, 2022, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 prohibits the enforcement of mandatory arbitration agreements in sexual assault and sexual harassment disputes.

This is a major change to the Federal Arbitration Act that will affect employers and employees who bring sexual assault or sexual harassment claims in the workplace. Below, we will discuss the effects of the amendments, including:

  • What the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act changes in the Federal Arbitration Act,
  • Open questions under the new arbitration laws, and
  • Employers’ next steps to ensure compliance with the new amendments.

What is the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021?

The new law amends the Federal Arbitration Act to prohibit the enforcement of mandatory arbitration clauses and class action waivers when there is a sexual assault or sexual harassment claim:

Notwithstanding any other provision of this title, 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.

Although arbitration clauses can still be included in employee agreements, the employee who files the claim or the named representative in a class action lawsuit can choose to void the arbitration clause, making it unenforceable.

What Does the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 Change?

What are the specific effects of the amendments to the Federal Arbitration Act?

  • Any predispute arbitration agreement or predispute class action waiver will be voidable, at the election of the person or persons bringing the claim, if the claims involve sexual assault or sexual harassment, and
  • The courts, and not an arbitrator, must determine whether the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 applies to an agreement to arbitrate and whether the agreement is valid and enforceable, even if the agreement delegates the decision to an arbitrator.

The amendments take effect immediately but do not apply to any claims that were brought before March 3, 2022.

Key Definitions in the Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021

The Act defines key terms, including:

  • Predispute arbitration agreement: any agreement to arbitrate a dispute, where the dispute had not yet arisen at the time of making the agreement,
  • Predispute joint-action waiver: any agreement, whether or not it is a part of the predispute arbitration agreement, that would prohibit or waive a person’s right to participate in a joint, class, or collective action concerning a dispute that had not yet arisen at the time of the making of the agreement,
  • Sexual assault dispute: means a dispute involving a nonconsensual sexual act or sexual contact defined in section 2246 of title 18 or similar applicable Tribal or State law, including when the victim lacks capacity to consent, and
  • Sexual harassment dispute: means a dispute related to any conduct that would constitute sexual harassment under applicable federal, tribal, or state law.

Open Questions

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 leaves open some important questions about how the Act will be applied. For example, how will the Act affect ancillary claims that are brought along with sexual assault or sexual harassment claims?

Can a plaintiff avoid arbitration on non-sexual harassment claims by also alleging sexual harassment?

If a court determines that an arbitration agreement is subject to the Act while other claims brought by a plaintiff are not subject to the Act, will the court sever the claims, sending the other claims to arbitration while allowing the sexual assault claim to proceed in court?

For example, if an employee brings a race discrimination claim, can the employee avoid mandatory arbitration by also alleging sexual harassment? Or would the court separate the two claims, sending the race discrimination claim to arbitration?

What about choice of law provisions?

The US Supreme Court has held that parties can choose to opt out of the Federal Arbitration Act completely by choosing the state’s law that will govern an agreement, but a contract’s general choice of law selecting a particular state’s law to govern disputes is not enough – the parties must be specific and there must be no ambiguity in the agreement as to the law that will apply and what portions of the agreement it will apply to.

Will the courts continue to follow this rule as to arbitration agreements in disputes related to sexual assault or sexual harassment claims? Can the parties specifically agree to exempt all claims, including but not limited to sexual assault and sexual harassment, from the provisions of the FAA, and make them subject to a particular state’s law?

What Should Employers Do Next?

Employers should review their agreements that contain mandatory arbitration provisions or class action waivers to ensure that they are complying with the amendments to the Federal Arbitration Act.

For example, agreements may be revised to explicitly exclude sexual assault or sexual harassment claims from the arbitration agreement or class action waiver. Or employers may revise their agreements to explicitly include sexual assault or sexual harassment claims in their choice of law provision that exempts disputes from the FAA’s provisions.

Any changes to an employer’s agreements should be effectively communicated to the employees, and this may be a good time for employers to review their training and policies regarding sexual harassment, employment discrimination, retaliation, and grievance procedures.

Please feel free to contact one of our Murray Lobb Attorneys for assistance in reviewing your company’s current policies and employee agreements to ensure compliance with the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act and to protect your company from frivolous litigation.

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