Federal Law Ends Mandatory Arbitration of Sexual Harassment and Sexual Assault Claims
On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act), which took effect immediately. The Act effectively bans employers from requiring mandatory arbitration of sexual harassment and sexual assault claims, whether arising under federal, state, or tribunal law. Consequently, employees across the U.S. now have the right to choose between pursuing such claims in court or through private arbitration.
The Act amends the Federal Arbitration Act (FAA) by rendering “predispute arbitration agreements” and “predispute joint action waivers” invalid and unenforceable, at the employee’s election, as they relate to claims involving a sexual harassment or sexual assault dispute. A predispute arbitration agreement is defined under the Act as “any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement.” A predispute joint action waiver is defined as “an agreement, whether or not part of a predispute arbitration agreement, that would prohibit, or waive the right of, one of the parties … to participate in a joint, class, or collective action in [any] forum, concerning a dispute that has not yet arisen at the time of the making of the agreement.” Only courts, not arbitrators, may decide disputes over the Act’s applicability to an arbitration agreement, as well as the validity and enforceability of any such agreement to which the Act does apply.
Notably, the Act applies retroactively to all existing predispute arbitration agreements and predispute joint action waivers, including those in effect prior to enactment of the Act. However, because this retroactivity is limited to circumstances in which a dispute has yet to arise, claims that have already been asserted would still be subject to mandatory arbitration under an executed predispute arbitration agreement. Likewise, parties remain free to enter into written agreements to arbitrate claims involving alleged conduct constituting a sexual harassment or assault dispute after the dispute arises.
In light of this new federal law, employers are advised to review their agreements that contain mandatory arbitration provisions, which include any class/collective action waivers therein, for any necessary revisions to ensure compliance with this Act. Employers should consider revising their arbitration agreements going forward to explicitly exclude sexual harassment and sexual assault disputes. Employers should also verify that existing arbitration agreements already entered into with employees include a severability clause, explaining that in the event any term or provision of the agreement is determined to be void or unenforceable, the remainder shall remain effective to the fullest extent permissible by law.
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