On March 3, 2022, President Biden signed into law the bipartisan “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (the Act). Under the Act, which amends the Federal Arbitration Act, predispute arbitration agreements and predispute joint action waivers are invalid and unenforceable with respect to sexual harassment disputes and sexual assault disputes, at the election of the accuser. The Act took effect when it was signed and applies to any claims or disputes that arise after the effective date, even if the arbitration agreement pre-dates the Act. The Act does not affect the enforceability of arbitration agreements and joint action waivers in connection with other types of claims or disputes.
As President Biden signed the Act, he declared that it was a “momentous day for justice and fairness in the workplace.” When she introduced it in the Senate, Senator Kirsten Gillibrand said that it “represents one of the most significant workplace reforms in American history.” Many employers require employees to sign agreements providing for employment disputes to be dealt with in arbitration, eliminating employees’ ability to file suit against the employers, including for sexual harassment and sexual abuse. The #MeToo movement highlighted that this practice allows sexual harassment complaints to be handled out of the public eye, in a forum that often tends to be more favorable to the employer and to shield the perpetrator. Under the Act, an employee alleging sexual harassment or sexual abuse will have the option to file suit, even if the employee had signed an arbitration agreement. An employee can still agree to arbitrate a sexual harassment dispute or sexual assault dispute after the dispute arises, but the Act makes it clear that the decision is the employee’s alone.
The Act does not apply only to the workplace, however. Arbitration agreements are used in many settings. In a press release following the House’s passage of the Act, Representative Kathy Castor stated that it will void “forced arbitration agreements” in any contract when there is a sexual harassment dispute or sexual assault dispute, noting that such agreements are often contained in property leases, nursing home paperwork, and “in the terms and conditions we agree to every day for ride-share apps, movers, handyman services and more.” In the Senate, specific reference was made to the case of a woman who was sexually assaulted by a massage therapist at a massage company where she had a monthly membership. To cancel her membership, she had to download the company’s app and agree to its terms and conditions, which included an arbitration clause. When she tried to file a lawsuit against the company concerning the sexual assault, the company invoked the arbitration clause. Under the Act, an individual in this situation would be able to file suit against the massage company regardless of the “forced arbitration clause” in the terms and conditions.
The Act’s inclusion of predispute joint action waivers is also significant. Employment contracts and other types of contracts sometimes contain provisions waiving an individual’s ability to bring or participate in joint actions, such as class actions. These waivers prevent multiple persons claiming sexual harassment or assault by the same person or employer from joining their claims together in a single action. The Act invalidates these waivers and allows joint or class actions claiming sexual harassment or sexual abuse to be filed in court. The defense of joint claims is more expensive, the damages in a single case can multiply, and a multitude of similar complaints can have persuasive power in front of a jury.
Employers and other businesses that use arbitration agreements should review their agreements for compliance with the Act. The Act does not specifically require employers and others to amend existing arbitration agreements or to change the agreements they use going forward; however, if an agreement requires arbitration of all claims and does not carve out sexual harassment disputes and sexual abuse disputes, it may be possible that a court would invalidate the entire arbitration clause.
This is also an opportune time for employers to consider whether there is more they can or should do to prevent sexual harassment in the workplace, now that they are unable to mandate arbitration of sexual harassment claims and such claims are more likely to be presented to a jury in a public trial instead of a private hearing before an arbitrator.
This blog and these materials are not intended to provide legal advice. They do not represent the legal opinions of the firm, nor should they be regarded as the legal positions of any client of the law firm of Mateer Harbert, P.A. They are provided for general informational purposes only. These materials should not be used as a substitute for the advice of qualified legal counsel.