This is an update to the original article posted on February 21, 2022, New Bill Likely to Shift #MeToo Cases from Arbitration to Courts.
As anticipated, President Biden has signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (hereinafter “new law”). The new law amends the Federal Arbitration Act (FAA) to give victims of sexual assault and/or harassment the right to choose whether to bring their claims in court or to arbitrate their claim.
What do we know?
Although this update and the original article are framed in an employment context, the new law amends Title 9 of the United States Code which applies beyond the employment context and is thus applicable to arbitration agreements/provisions beyond those contained in employment contracts.
The new law applies to all claims that arise or accrue on or after March 3, 2022, regardless of the date of the agreement at issue. The new law, however, does not affect claims that arose or accrued before March 3, 2022.
The new law does not affect otherwise valid arbitration agreements for claims that are not related sexual assault and sexual harassment. However, future litigation is anticipated over the scope and interpretation of this law which is explained more fully below.
The applicability and enforceability of the new law to a particular dispute or agreement shall be decided by a federal court, not an arbitrator, even if the parties agree to arbitration or the agreement itself delegates such decisions to an arbitrator.
What remains unclear?
Because the new law broadly states that mandatory arbitration provisions are invalid and unenforceable for any case related to a sexual-assault or sexual-harassment dispute filed under federal, tribal or state law – as opposed to merely stating that only claims for sexual assault and/or sexual harassment are exempted from arbitration – it is foreseeable that the interpretation of the new law’s language will be a central dispute when it reaches the courts in practice.
For example, courts may decide that the word “case” means that all claims asserted in a “case” that includes a sexual assault or harassment claim are precluded from arbitration. Or, the courts may narrow the law’s applicability to only those claims for sexual assault and/or sexual harassment. Ideally, the courts will look to legislative history and congressional intent, as Members of Congress made their intent[1] clear: Where claims are related, all claims should stay together in court, but employees should not be able to manipulate the system to keep unrelated claims out of arbitration.
In the interim, while interpretation questions remain unanswered, the new law is likely to incentivize employees to bundle sexual assault and/or sexual harassment claims together with other types of claims as a means to avoid arbitration altogether. Thus, although employers with existing mandatory arbitration agreements should be careful not to move to compel arbitration of cases involving only sexual assault or harassment claims, in cases involving additional claims, they should be prepared to move to sever any unrelated claims early in litigation and until it is more clear how federal courts will interpret the aforementioned language.
Final thoughts
In a February 1, 2022, Statement of Administration Policy, the White House stated, “The Administration also looks forward to working with the Congress on broader legislation that addresses these issues as well as other forced arbitration matters, including arbitration of claims regarding discrimination on the basis of race, wage theft, and unfair labor practices.” Therefore, employers and businesses alike should continue to closely monitor developments in this area as this law likely will be used as a template for further bills prohibiting predispute arbitration agreements in other areas, such as for discrimination and discriminatory harassment claims. RumbergerKirk attorneys will continue to track the same.
[1] https://www.congress.gov/117/crec/2022/02/10/168/27/CREC-2022-02-10-pt1-PgS624.pdf
