On March 3, 2022, President Biden signed into law the bill entitled “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act.” The purpose of the law is to invalidate pre-dispute arbitration agreements that preclude an employee from filing a lawsuit in court in cases of sexual assault or harassment.
The law prohibits employers from enforcing mandatory pre-dispute arbitration agreements, as well as agreements prohibiting participation in a joint, class or collective action in any forum, in cases involving sexual harassment and sexual assault. The law defines “pre-dispute arbitration” as any agreement to arbitrate a dispute that had not yet arisen at the time of making the agreement. The law defines “joint-action waivers” as any agreement that prohibits or waives the right of one of the parties to participate in a joint, class or collective action in a judicial, arbitral, administrative or other forum. The law only applies to disputes or claims that arise or accrue on or after the date the bill was enacted into law, creating some ambiguity as to its applicability to agreements that pre-date March 3. Lastly, of note, the law requires courts (and not arbitrators) to resolve all disputes regarding the law’s applicability, irrespective of whether the employee-employer agreement provides for arbitrator determination.
While courts will not provide clarity as to the law’s retroactivity and some of the law’s ambiguity in other areas, it is now the law that employers cannot enforce arbitration agreements or class/collective action waivers for sexual harassment or assault claims that occur after March 3. Of course, an employee can always choose to agree to arbitration after a dispute arises, but the expectation is that will not be a common occurrence.
The law was first introduced as a bill in 2017 in light of the #MeToo movement, but its language has changed over the years to focus exclusively on cases involving sexual harassment and assault. It was passed by Congress in February of this year. This new law is one of the most significant changes to employment law in recent years, particularly considering that it is federal legislation that received broad bi-partisan support. It is also a partial response to the criticism of the widespread deference given to arbitration agreements under recent Supreme Court case law. However, it was narrowly written and will not destroy all pre-dispute arbitration agreements in employment matters. Notably, the law does not apply to nondisclosure agreements that often prohibit sexual assault victims from speaking out against their perpetrators.
In terms of next steps, employers should review and revise their arbitration programs. As always, employers should evaluate the sufficiency of their policies and practices with respect to preventing and responding to complaints of sexual harassment and assault so that they have confidence that they have effective processes and culture in place. Lastly, employers should monitor caselaw on this law which will clarify its scope and applicability.