Last month, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“Act”). The Act amends the Federal Arbitration Act to give alleged victims the choice regarding whether to arbitrate employment disputes involving sexual assault or sexual harassment.
Employers should be aware of the following key takeaways:
First, the Act applies to any sexual assault or sexual harassment dispute that arises on or after March 3, 2022. For disputes that arose before March 3, 2022, agreements mandating arbitration of sexual harassment and sexual assault claims remain enforceable, subject to state laws.
Second, parties remain free to agree mutually to arbitration after a sexual harassment or sexual assault claim has been asserted.
Third, the applicability of the Act to a particular dispute or agreement shall be decided by a court of law, not an arbitrator. This is a significant change from the status quo, which permits parties to delegate decisions of interpretation and applicability to an arbitrator.
Fourth, creative plaintiffs may attempt to invalidate broad, “mandatory” arbitration agreements that do not specifically carve out sexual assault or sexual harassment claims from the mandate.
Fifth, the Act’s prohibition on forced arbitration applies to a “case” relating to sexual assault or sexual harassment. It is unclear how courts will interpret this language. Courts may decide that the word “case” means all claims asserted together in a lawsuit, including claims other than sexual harassment or sexual assault.
Sixth, employers should update their arbitration agreements to state expressly that the employee has a choice regarding whether to arbitrate sexual harassment and sexual assault claims.
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