President Biden signs into law a landmark ban on mandatory arbitration and class-action waivers for sexual assault and harassment claims.
On March 3, 2022, President Biden signed into law H.R. 4445, titled "Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021" ("Act"). The law amends the Federal Arbitration Act to prohibit employers from enforcing pre-dispute agreements mandating arbitration of sexual assault and harassment claims. The Act applies to disputes that "involv[e] a nonconsensual sexual act or sexual conduct" (as those terms are defined in the federal criminal code or by similar tribal or state law) or that involve sexual harassment, as defined by federal, state, or tribal law.
In addition to giving claimants the option to void the mandatory arbitration of such claims, claimants also may elect to invalidate waivers of their right to litigate such claims in joint, class, or collective action proceedings. Employers should note that certain claimants, due to confidentiality and efficiency (among other) concerns, may still prefer to arbitrate sexual assault and harassment claims.
The law applies to existing arbitration clauses and class-action waivers relating to such claims, whether they appear in an arbitration agreement or other employment or separation agreements, and irrespective of the date into which they were entered. The Act applies only to disputes or claims that arise or accrue on or after March 3, 2022. Thus, mandatory arbitration agreements and class-action waivers relating to applicable claims pending prior to the Act's effective date remain valid. The Act does not require employers to amend or modify their existing agreements; rather, the law provides employees with the ability to elect whether or not to arbitrate sexual assault and harassment claims and prevents employers from enforcing mandatory arbitration clauses with respect to these claims.
The new law explicitly requires a court, rather than an arbitrator, to determine the Act's applicability to such agreements and the validity and enforceability of arbitration agreements or class-action waivers.
A few states, like New York and California, had previously enacted their own bans on mandatory arbitration in the sexual harassment context. However, whether explicit in those statutes or not, many employers interpreted those state laws to be preempted by the Federal Arbitration Act. With this new federal legislation, employers no longer have such a preemption argument.
In light of this development, we urge employers that rely upon mandatory arbitration and/or class-action waivers as part of their organization's overall legal strategy to fully consider the impact of the new law, taking into consideration their own litigation and arbitration history (and related costs and budgets) and the public and employee-relations impact of mandatory arbitration provisions. Such employers should determine whether mandatory arbitration clauses of general applicability to employment claims continue to make sense for them or whether, for example, a more limited scope of types of claims being subject to arbitration might serve a strategic value.
In addition, we suggest that employers assess the interplay of federal and applicable state laws that address mandatory arbitration in the employment context and encourage them to review their template employment agreements. Finally, employers should ensure that any sexual harassment employee training is up to date.
