Business and Legal Insights

Last month, both bodies of Congress approved the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (H.R. 4445), and President Biden is expected to sign the bill into law in the near future. This new piece of legislation makes a fundamental change to the arbitration of employment law claims because it prohibits employers from enforcing arbitration agreements against employees in connection with claims of sexual harassment or sexual assault. A “sexual assault dispute” means a dispute involving nonconsensual sexual act or sexual contact as such terms are defined under Title 18, Section 2246 of the federal law or under a parallel tribal or state law (including when the victim lacks the capacity to consent).  A “sexual harassment dispute” is a dispute relating to conduct alleged to be “sexual harassment” under applicable federal, tribal or state law. 

While the Act does extend to arbitration agreements between employers and employees that pre-dated the enactment of the Act, it only applies to specific sexual harassment and sexual assault claims that arise or accrue on or after the date of enactment. The Act also does not prohibit an employee from electing to arbitrate sexual harassment or sexual assault claims—rather, it only prohibits employers from enforcing such provisions.

The Act applies not just to lawsuits brought by individuals. It also bars employers from enforcing any agreement waiving an employee’s right to participate in a joint, class, or collective action in any forum with respect to claims of sexual harassment and sexual assault.

Finally, the Act states that the threshold question of whether the enforceability of an arbitration agreement is covered by the Act must be decided by a court and not an arbitrator.

Moving forward, while it is clear that the Act applies to employment arbitration agreements entered into even before the enactment of the Act, employers should consider revising their future employment arbitration agreements to specifically exclude arbitration of sexual harassment and sexual assault claims, or to making it clear that arbitration of those claims is at the employee’s election. However, in the latter instance, employers should consider whether they themselves may want a judicial forum under a circumstance where an employee might want to elect arbitration of such a claim – perhaps because the claim lends itself to summary judgment or can be more effectively litigated in court. Likewise, employers should consider revising any joint-action waiver to exclude sexual harassment and sexual assault claims.

Some practicalities of the new Act still remain unclear. For example, how will the Act apply, if at all, to harassment claims that are based on “sex,” but that are not “sexual harassment” claims in the classic sense. Employers should remain abreast of the ensuing litigation around the Act which will inevitably occur in the future.