Congress Passes Law Banning Mandatory Arbitration of Sexual Misconduct Claims

Congress Passes Law Banning Mandatory Arbitration of Sexual Misconduct Claims

Congress recently passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (H.R. 4445), which invalidates pre-dispute agreements mandating arbitration of claims of either sexual assault or sexual harassment. The measure passed with rare bipartisan support, and President Joe Biden has already stated that he will sign the legislation into law. 

What Does the HR 4445 Prohibit?

While states have passed similar laws banning mandatory arbitration of sexual misconduct claims, the laws were subject to preemption under the Federal Arbitration Act (FAA), which provides that arbitration agreements “shall be valid, irrevocable, and enforceable save upon such grounds as exist at law or in equity for the revocation of any contract.” 

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (Act) expressly amends the FAA to provide that predispute arbitration agreements and predispute joint-action waivers are unenforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute, at the election of the person or class representative alleging the sexual misconduct.

What Claims Are Covered?

It is important to note that the Act only applies to the forced arbitration of sexual harassment and sexual assault claims. It does not prohibit the arbitration of other claims between employers and employees. Additionally, the Act expressly states that it will not apply retroactively to any claims that arose or accrued prior to its enactment.  

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act defines sexual assault disputes as those involving a nonconsensual sexual act or sexual contact, as such terms are defined in section 2246 of title 18 or similar applicable Tribal or State law, including when the victim lacks capacity to consent. The term “sexual harassment dispute” means a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.

What Employee Arbitration Agreements Are Unenforceable?

The Act applies to predispute arbitration agreements, which are defined as any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement. It also applies to “predispute joint-action waivers,” which is an agreement, whether or not part of a predispute arbitration 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 in a judicial, arbitral, administrative, or other forum, concerning a dispute that has not yet arisen at the time of the making of the agreement. 

The Act provides that its applicability to an agreement to arbitrate and the validity and enforceability of an agreement to which the Act applies must be determined by a court, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement; and irrespective of whether the agreement purports to delegate such determinations to an arbitrator. Any disputes over arbitrability will also be governed by federal law. 

Does HR 4445 Apply Retroactively?

The Act applies retroactively, which means that any existing arbitration agreement that forces employees to arbitrate sexual harassment and sexual assault disputes on an individual basis or as a class or collective action will be unenforceable once the law takes effect. 

What Employers Are Covered?

HR 4445 applies to businesses of all sizes, and there is no exception for small employers.

Can Employees Elect to Arbitrate?

Yes,  the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act gives potential plaintiffs the option to pursue arbitration if they chose to do so.  The employee and employer must agree to arbitrate a covered dispute after it occurs. Additionally, the employee must agree in writing to arbitrate.

What Should Employers Do Next?

Employers should begin the process of amending their current arbitration agreements to expressly exempt sexual harassment and sexual assault disputes from arbitration unless the employee voluntarily agrees post-dispute to arbitrate these claims and confirms that choice in writing.

In the meantime, employers may continue to use current arbitration agreements that require employees to arbitrate sexual harassment and sexual assault disputes; however, such agreements will be unenforceable with respect to a claim of sexual misconduct, unless the employee consents in writing. 

If you have questions, please contact us

For assistance with any needs your company may have regarding such employment disputes please contact me, Arianna Mouré, at 201-896-4100.