Following the recent trend of state laws prohibiting mandatory arbitration of sexual assault and harassment claims, the United States Senate passed HR 4445, entitled ‘Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021’ on 10 February 2022.
Mandatory arbitration agreements are widely utilised in the United States and have been repeatedly upheld by the US Supreme Court. However, they have been criticised in the context of the #MeToo movement as they typically have confidentiality provisions and eliminate access to a jury trial.
The proposed bill, which the House has passed and President Biden is expected to sign into law, amends the Federal Arbitration Act (FAA) to prohibit employers from including mandatory arbitration clauses in pre-dispute arbitration agreements (i.e., contracts, employee handbooks, or offer letters) that apply to claims of sexual harassment or assault. The proposed bill also bars the inclusion of any provisions waiving an employee’s right to bring sexual harassment or assault claims jointly and/or on a class basis.
1. The proposed bill applies to claims that arise after it is signed into law. Although the language of the proposed bill is somewhat unclear, the proposed bill goes into effect immediately upon enactment and appears to apply to any claims or disputes of sexual harassment or assault that arise after the bill goes into law
As such, even if an employer entered into a mandatory arbitration agreement with an employee before this bill becomes law, it is unlikely that any claims or disputes relating to sexual harassment or assault that arise after the bill is signed into law will be subject to arbitration.
2. Employees may still elect to arbitrate sexual harassment and assault claims. Critically, the proposed law provides employees the option to arbitrate such claims if they so desire.
3. Revisions to arbitration agreements may be necessary. Employers should review any agreements containing arbitration clauses or class action waivers to determine whether the bill, if signed into law, will render such agreements and/or class action waivers unenforceable. Any provisions requiring employees to waive their rights to bring sexual harassment or assault claims may run afoul of the bill.
4. The proposed law may allow employees to avoid arbitration. As drafted, the proposed bill may create an avenue to avoid arbitration entirely by asserting sexual harassment or assault claims. Although it is not clear whether non-harassment or assault claims included in a lawsuit that also alleges sexual harassment or assault would be tried in court or subject to arbitration, there is some concern that plaintiffs’ counsel may include these types of claim to avoid arbitration and facilitate having an entire dispute heard before a court. These issues will have to be resolved through litigation.
5. Courts, not arbitrators, will decide challenges. A court, applying federal law, will decide challenges to the validity or enforceability of arbitration agreements covered by HR 4445.
6. The proposed law applies beyond the workplace. While proponents of the bill have been focused on perceived workplace inequity, the bill is not limited to ‘workplace’ sexual harassment and assault. The language affords the same protections to any individual who may be a victim of sexual harassment and assault in non-workplace settings where a mandatory arbitration clause applies.
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