August 7, 2022

Volume XII, Number 219

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August 05, 2022

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Congress Passes Federal Law Restricting Arbitration Agreements for Sexual Assault, Harassment Claims

A new law making predispute arbitration agreements and class action waivers covering sexual assault and sexual harassment claims invalid and unenforceable has passed in Congress and is headed to President Joe Biden’s desk.

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 amends the Federal Arbitration Act (FAA) to give employees who are parties to arbitration agreements with their employers the option of bringing their claims of sexual assault or sexual harassment in arbitration or court. President Biden reportedly is expected to sign it shortly.

Background

The FAA provides that written agreements to arbitrate are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” As recently as 2018, the U.S. Supreme Court reaffirmed, in Epic Systems v. Lewis, that the FAA requires enforcement of arbitration agreements, including those with class action waivers, in accordance with their terms.

In response to the Court decision and the #MeToo movement, several states enacted or proposed legislation curbing use of arbitration agreements for sexual harassment or other employment claims. Such laws conflicted with the FAA as to agreements governed by it and are being challenged in litigation. Congress also has tried to pass similar bills limiting employers’ ability to mandate predispute arbitration for employment disputes, such as the PRO Act, the FAIR Act, and Build Back Better. None has passed until now.

Key Provisions

Originally introduced in 2017, the Act adds a section to the FAA: 

[A]t the election of the person alleging conduct constituting a sexual harassment dispute or a sexual assault dispute …. 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.

The Act defines “sexual assault dispute” as “a dispute involving a nonconsensual sexual act or sexual contact” and “sexual harassment dispute” as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” The term “joint-action” waiver includes class and collective action waivers.

The Act further provides that the validity or enforceability of an agreement will be determined by a court rather than an arbitrator, despite the existence of a contractual term to the contrary. Finally, the Act states that it shall apply with respect to any dispute or claim that arises or accrues on or after the date of the Act’s enactment.

What Employers Need to Know Now

  1. As enacted, the Act applies only to “a case which is filed under Federal, Tribal, or State law and relates to the sexual assault and sexual harassment claims.” This means that otherwise valid arbitration agreements remain valid and enforceable with respect to other types of claims. That said, we anticipate litigation over the scope of the law.

  2. The Act applies to invalidate arbitration agreements and class or collective action waivers with respect to sexual assault and sexual harassment claims arising or accruing after the date of the Act’s enactment. Regardless of the date of the agreement at issue, the Act does not affect claims that arose or accrued before the Act’s enactment.

  3. Employees who are parties to an arbitration agreement may choose whether to pursue their sexual assault and sexual harassment claims in arbitration or court. While arbitration is not entirely confidential, it is inherently more confidential than litigation in court because of the absence of a public record. Employees who are parties to arbitration agreements may choose the more confidential arbitration forum. The new law makes clear that, with respect to sexual assault and sexual harassment claims, it is up to the employee, not the employer, regardless of what an arbitration agreement says.

  4. Despite what an arbitration agreement says, courts, not arbitrators, will decide whether claims are subject to arbitration. Thus, when an employee chooses to file a sexual assault or sexual harassment claim in court, the court, rather than an arbitrator, decides whether court is the proper forum for the claims. 

What Does the Future Hold?

Employers with arbitration agreements should anticipate more sexual assault and sexual harassment claims being filed in court, rather than arbitration. In addition, we expect legislative efforts to broaden the scope of the law to add other types of employment claims to the list of claims that may not be subject to predispute arbitration agreements. In a February 1, 2022, Statement of Administration Policy, the White House stated, “The Administration also looks forward to working with the Congress on broader legislation that addresses these issues as well as other forced arbitration matters, including arbitration of claims regarding discrimination on the basis of race, wage theft, and unfair labor practices.” The Act took years to pass in its current form and some commentators observe that its bipartisan passage is attributed to its narrow scope. For now, the law is limited to sexual assault and sexual harassment claims.

Finally, employers should continue to closely monitor developments in this area as this law likely will be used as a template for further bills prohibiting predispute arbitration agreements in other areas, such as for discrimination and discriminatory harassment claims.

Jackson Lewis P.C. © 2022National Law Review, Volume XII, Number 42
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About this Author

Samia Kirmani, Jackson Lewis Law Firm, Unemployment Counseling Attorney
Principal

Samia M. Kirmani is a Principal in the Boston, Massachusetts, office of Jackson Lewis P.C. She concentrates her practice in employment counseling, training and litigation on behalf of management.

Ms. Kirmani provides practical legal advice to clients on various employment law issues, including discrimination, health and leave management, reductions in force, retaliation and whistleblower matters, individual separations, and employee relations issues. Ms. Kirmani also assists clients with policy creation, revision and...

617-367-0025
Scott P. Jang, Jackson Lewis, wrongful termination lawyer, unfair competition attorney
Associate

Scott P. Jang is an Associate in the San Francisco, California, office of Jackson Lewis P.C. He represents management in all areas of employment law litigation.

Mr. Jang’s practice includes defending management in matters involving claims for breach of contract, discrimination, harassment, retaliation, wrongful termination, and unfair competition. He represents clients in both class action and single plaintiff cases.

Mr. Jang is particularly well-versed in federal litigation. Prior to...

(415) 394-9400
William Robert Gignilliat IV, Jackson Lewis, ERISA Benefits Litigation Lawyer, Employment Discrimination Attorney
Associate

Wm. Robert Gignilliat, IV, is an Associate in the Greenville, South Carolina, office of Jackson Lewis P.C. He practices employment law, defending management in litigation involving discrimination, retaliation, wages, ERISA benefits, and other issues.

While attending law school, Mr. Gignilliat was a member of the Georgia Law Review. After law school, he clerked for two years for the Honorable J. Randal Hall in the U.S. District Court for the Southern District of Georgia. He then clerked for the Honorable G. Ross...

864-672-8516
Corey Donovan Tracey Principal Jackson Lewis Disability, Leave and Health Management Workplace Training
Principal

Ms. Tracey counsels management across a broad spectrum of labor and employment law issues arising from all aspects of the employment relationship impacting both multi-state and local employers. She works as a strategic partner with employers to provide practical, business-focused compliance advice on a multitude of management decisions related to hiring; disciplinary action; termination; disability accommodations and leave management; policy and process development and implementation (particularly for multi-state compliance); reductions in force (including WARN Act and Older...

216-750-0404
Garen E. Dodge Labor Lawyer Jackson Lewis
Principal

Garen Dodge, a principal in the Washington, D.C. region office, has spent his career working side by side with clients looking to tackle the thorniest of labor and employment issues with creative solutions.

He has successfully defended employers, including Fortune 500 companies in a broad range of industries, including restaurants and retail, in matters involving privacy, discrimination, background checks, harassment, wage and hour, and occupational safety and health. His Washington, D.C. experience extends to representing clients before Congress and various...

703-483-8300
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