The U.S. Senate passed a bipartisan bill aimed at preventing employers from requiring workers to arbitrate sexual harassment and assault claims.  The bill will now go to President Biden for his expected signature.  Known as the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,”  the bill will amend the Federal Arbitration Act (FAA) to prohibit enforcement of contract clauses that require arbitration of workplace sexual harassment or assault claims.

Although this new legislation does not directly impact arbitration agreements used by consumer financial services companies, those companies need to remain alert.  On the one hand, this may simply be the latest in a series of congressional enactments that have created narrow exceptions to the FAA.  Previously, for example, Congress has made it unlawful for creditors to require active duty members of the military or their dependents to arbitrate, has banned pre-dispute arbitration provisions in motor vehicle franchise agreements and home mortgage contracts, and has given swine contract producers and live poultry growers the right to decline arbitration before entering into contracts.  On the other hand, this may encourage some in Congress to continue to press for more sweeping legislation that would prohibit the use of predispute arbitration agreements with class action waivers in all consumer contracts.  Only time will tell whether consumer financial services companies just dodged a bullet, or whether a broader fusillade is on the way.

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