New Federal Law Prohibits Mandatory Arbitration Of Sexual Harassment Claims
Last month, President Biden signed into law a measure that eliminates mandatory arbitration for workplace sexual harassment and sexual assault claims.
The new legislation amends the Federal Arbitration Act (“FAA”), the federal law that generally requires state and federal courts to give effect to agreements by parties to arbitrate disputes rather than filing suit in court. Under this new measure, employees may no longer be forced to arbitrate claims of sexual harassment or sexual assault. This change applies to standard arbitration agreements that many employers require all employees to sign, as well as to individually negotiated arbitration agreements.
Notably, the new measure does not bar employers and employees from entering into broad pre-dispute arbitration agreements providing for arbitration of all claims, including for sexual harassment or sexual assault. Rather, it simply gives an employee the right to opt out of such a requirement as to claims of sexual harassment or sexual assault and pursue such claims in court.
Additionally, the new legislation applies to all future claims of sexual harassment or sexual assault, regardless of when the parties’ pre-dispute arbitration agreement was signed.
Implications For Employers
With this change, employers will no longer be able to compel employees to arbitrate claims of sexual harassment or sexual assault, regardless of whether an employee signed a standard arbitration agreement mandated by the employer or an individually negotiated arbitration agreement. Rather, an employee will be able to opt out of such a requirement and pursue such claims in state or federal court.
Since an employee who has signed a pre-dispute arbitration agreement may decide to arbitrate a sexual harassment or sexual assault claim rather than pursuing it in court, employers may continue to use broad arbitration agreements. Again, however, employers should be aware that such an arbitration agreement will no longer preclude a plaintiff alleging sexual harassment or sexual assault from going to court.
Where an employee who has signed a pre-dispute arbitration agreement raises a claim of sexual harassment or sexual assault along with some other type of discrimination claim – e.g., for discriminatory termination – it seems likely that the employer will still have the right under the FAA to compel the employee to arbitrate that other claim, even if the employee chooses to assert the sexual harassment or sexual assault claim in court. The wording of the new legislation is not completely clear on this point, however, so this issue seems likely to be the subject of future litigation.
Finally, it is worth noting that nothing in the new measure prevents employers and employees from agreeing to arbitrate a claim of sexual harassment or sexual assault after an employee has asserted such a claim.
* * *
We will continue to provide updates as events warrant. In the meantime, please feel free to reach out to one of our experienced employment lawyers if you have any questions about the new legislation or arbitration agreements in general.