On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the Act), which amends the Federal Arbitration Act (the FAA) and prohibits employers from requiring employees to arbitrate claims of sexual assault or sexual harassment.
Effective immediately, the Act permits any individual that is a party to a predispute arbitration agreement (e.g., an arbitration clause in an offer letter) to elect to file a claim of sexual harassment or sexual assault that arises on or after March 3, 2022, in court or in arbitration regardless of whether the agreement at issue compels arbitration of such claims.
The Act also invalidates class action waivers with respect to sexual harassment or sexual assault claims. In pertinent part, the Act provides:
[A]t the election of the person alleging conduct constituting a sexual harassment 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 related to the sexual assault dispute or the sexual harassment dispute.
- The Act limits predispute arbitration agreements only with respect to claims of sexual harassment or sexual assault. Mandatory arbitration agreements may still be enforceable, subject to applicable state law, to compel arbitration of other employment-related claims.
- The Act limits predispute arbitration agreements not only with respect to individual claims of sexual harassment or sexual assault, but also to class or collective action waivers of such claims.
- The Act does not completely prohibit the arbitration of sexual harassment or sexual assault claims, but rather prohibits an employer from compelling arbitration of such claims. Ultimately, it is up to the employee to decide whether to file a covered claim in court or in arbitration, regardless of the terms of any mandatory arbitration agreement in place.
- The Act does not prevent employers from enforcing mandatory arbitration agreements for claims of sexual harassment or sexual assault that arose before March 3, 2022.
- Employers should anticipate more sexual assault and sexual harassment claims to be filed in court despite signed arbitration agreements whose terms require arbitration of those claims. Litigation to determine the scope of the Act and the definition of a case “related to the sexual assault dispute or the sexual harassment dispute” is expected. Specifically, courts will need to determine what happens when the case at issue includes but is not limited to claims of sexual harassment or sexual assault and whether non-covered claims subject to mandatory arbitration can (or should) be severed and sent to arbitration.
- The Act is the latest and most significant development in a nationwide trend stemming from the #MeToo movement to limit employers’ ability to mandate arbitration. Several states, including New York and California, have already passed legislation limiting the use of mandatory arbitration agreements and the U.S. House of Representatives recently passed the Forced Arbitration Injustice Repeal Act, which, if approved by the Senate and signed into law, would prohibit enforcement of all predispute arbitration agreements in employment, consumer, and other matters. We will continue to monitor arbitration developments at the state and federal level.
- Employers are advised to review their existing arbitration agreements in consultation with counsel to determine whether revisions are necessary.
Questions? Please reach out to Matthew Damm or your Fenwick contact for further guidance.