On March 3, 2022, President Biden, as expected, signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“Act”) into law. As we previously explained, the Act amends the Federal Arbitration Act (FAA) to make pre-dispute arbitration agreements for sexual assault and sexual harassment claims invalid and unenforceable. Parties remain free, however, to mutually agree to arbitration after a claim has been asserted. The new law delegates any disputes regarding the Act, including as to the arbitrability of claims, to the courts, and not an arbitrator, to decide.
While the amendment to the FAA appears limited, the Act’s application in a lawsuit with several claims that are potentially interrelated may present procedural and practical challenges. For instance, employment lawsuits alleging sexual harassment may also include derivative claims alleging discrimination and retaliation, or other employment-related claims. Some claims might be asserted only against the defendant company, while others might be asserted against individuals as well. Under the Act, the sexual harassment claim may have to be litigated in court, but the other claims potentially could proceed in arbitration pursuant to a valid arbitration agreement. Under such a scenario, employers would need to decide whether to permit all claims to proceed to court or whether to split the claims between the two forums. In such cases, where parties disagree, courts would need to decide which claims must be litigated and which, if any, may be arbitrated. If split, the court might also need to determine, among other things, the order of proceedings and whether to stay proceedings for one set of claims pending the outcome of the other. How this will play out as a practical matter will likely depend upon the particular circumstances of each case.
Going forward, employers that include arbitration clauses in their employment agreements should update their agreements as necessary to ensure that they comport with the Act.
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