Companies that utilize stand-alone arbitration agreements for employment disputes or that have arbitration clauses contained within their employment agreements need to take note of a bill that is headed from Congress to President Biden’s desk. On February 10, 2022, the Senate passed H.R. 4445, known as the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” which prohibits the enforcement of any pre-dispute arbitration agreements or joint action waivers related to sexual harassment and sexual assault disputes. Many employers utilize arbitration agreements and joint action waivers to streamline the resolution of workplace disputes with their employees and to maintain confidentiality over such matters. These tools can help companies to reduce the risk of burdensome joint, class, or collective action litigation, as well as to cut down the resolution time for workplace disputes. Arbitration can also be a more confidential and less expensive means of resolving a dispute than defending a lawsuit in court. In the wake of the #MeToo movement, however, concerns have been raised over the manner in which arbitration agreements and joint action waivers have been used to resolve disputes involving sexual harassment and sexual assault.
Congress has attempted to address these concerns by amending the Federal Arbitration Act to prohibit, at the employee’s election, the enforcement of “Pre-Dispute Arbitration Agreement[s]” and “Pre-Dispute Joint-Action Waiver[s]” related to “Sexual Assault Dispute[s]” and “Sexual Harassment Dispute[s].” The Act defines these terms as follows:
- Pre-Dispute Arbitration Agreement: “[A]ny agreement to arbitrate a dispute that has not yet arisen at the time of the making of the agreement.”
- Pre-Dispute Joint-Action Wavier: “[A]n agreement . . . that would prohibit, or waive the right of, one of the parties to the agreement to participate in a joint, class, or collective action . . . concerning a dispute that has not yet arisen at the time of the making of the agreement.”
- Sexual Assault Dispute: “[A] dispute involving a nonconsensual sexual act or sexual contact, as such terms are defined” by applicable federal, state or tribal law.
- Sexual Harassment Dispute: “[A] dispute relating to conduct that is alleged to constitute sexual harassment” under applicable federal, state, or tribal law.
Employees involved in Sexual Assault or Sexual Harassment Disputes will now be entitled to bring their claims in the court system, including through joint, class, or collective actions, if applicable, despite having signed a prior Pre-Dispute Arbitration Agreement or Pre-Dispute Joint-Action Waiver.
Notably, the new law will only apply to “Pre-Dispute” Arbitration Agreements and Joint Action Waivers. As such, employees and employers will still be permitted to enter into Arbitration Agreements or sign Joint-Action-Waivers after a dispute has arisen. Employees, however, will now have the ability to assess the merits of the court system versus the arbitration system based on the dispute at hand to determine which forum best suits their needs and objectives. This new law will effectively eliminate an employer’s ability to force arbitration of sexual harassment and assault claims, which will lead to more costly and public litigation of such disputes.
As President Biden is expected to sign this new bill into law in the coming days, we recommend discussing your company’s arbitration procedures and waivers with employment counsel to remain compliant with this new law.