EMPLOYERS WITH ARBITRATION AGREEMENTS – TAKE HEED!

On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”). The Act amends the Federal Arbitration Act (FAA) and prohibits employers from enforcing pre-dispute arbitration agreements, and class or claim waivers, in connection with claims of sexual assault or sexual harassment. The Act is an unprecedented departure from the federal government’s nearly century-old love affair with arbitration as an alternative to in-court litigation. Any litigator will tell you that if an agreement so much as mentions arbitration, and the other side wants to enforce it, it is a bear of a fight to get out of it. A fight quite often lost. The Act’s scope is narrow, covering only claims of sexual assault or sexual harassment. However, with this never-imagined-it- would-happen exception to forced arbitration, one wonders if additional exceptions will someday follow.

Takeaways

1. Under the Act, an employee may elect to invalidate arbitration agreements and class or collective action waivers, but only with respect to claims of sexual assault or sexual harassment.
2.  The Act applies to any dispute or claim that arises or accrues on or after March 3, 2022, regardless of when the agreement was executed. *It is unclear whether the Act will apply to claims that constitute a “continuing violation” (i.e., acts that occurred before March 3, 2022, but are alleged to have continued to occur after March 3, 2022).
3. The Act defines “sexual assault dispute” as a dispute involving a nonconsensual sexual act or sexual contact, as such terms are defined in Section 2246 of Title 18 or similar applicable Tribal or State law, including when the victim lacks capacity to consent. The Act defines a “sexual harassment dispute” as relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.
4. The Act does not change the existing requirement that Title VII claims must initially be filed with the EEOC, or applicable state agency.
5. It is unclear how courts will handle cases with multiple claims (e.g., claims of racial discrimination and sexual harassment) or parties.
6. The Act is clear that the courts, and not an arbitrator, will determine whether an arbitrator has authority to rule on a dispute.

Recommended Action

First and foremost, stay vigilant to avoid claims from arising in the first place – continue stamping out workplace sexual assault and harassment. If claims nevertheless arise, know that arbitration very likely may not be an option and factor that into your decision making. If we can help, please do not hesitate to contact us.