On February 10, 2022, a bipartisan group of U.S. legislators passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which amends the Federal Arbitration Act to add a new provision that makes pre-dispute agreements requiring arbitration of “sexual harassment” and “sexual assault” claims unenforceable at the claimant’s option. The bill applies to both individual and class claims relating to “sexual harassment” and “sexual assault” under federal, state, or Tribal law, whether such claims are brought in the employment context or otherwise. The bill is currently awaiting President Biden’s signature and will apply to disputes or claims that arise on or after the date of enactment.

The bill’s carve-out does not apply to sexual discrimination claims or other discrimination claims based on a protected class status under Title VII or state law. The applicability of this provision to an arbitration agreement and the validity and enforceability of the agreement must be decided by a court rather than an arbitrator, regardless of whether the agreement itself delegates such decisions to an arbitrator.

Many factors influence an employer’s decision to require that its workforce arbitrate claims. In general, arbitration provides greater privacy concerning the dispute and generally produces a faster result for both parties than court litigation. For employers, arbitration also reduces the prospect of “runaway” jury verdicts, and can reduce the time and expense of litigation in state or federal court due to the limited scope of discovery and motion practice. On the other hand, arbitration can have drawbacks. Parties may be less likely to obtain summary judgment in an arbitration than in court, and arbitrators may allow evidence that a court would not because they may not be not bound by the same evidentiary rules. Arbitration can also be expensive, especially if one of the parties, often the employer, agrees to pay the arbitration costs. Also, although generally a quicker process, it can take time to get on the calendar of sought-after arbitrators. In addition, there are limited rights of appeal in arbitration, and it is hard to overturn an arbitration award, even those that are clearly erroneous.

This is a good time for employers to review whether they want to use arbitration agreements to resolve disputes. Employers will also want to review their current agreements to ensure that they are consistent with the requirements of this new law.