President Biden Signs Bill Prohibiting Forced Arbitration of Disputes Involving Sexual Assault and Harassment
On March 3, 2022, President Biden signed a bill that prohibits the forced arbitration of disputes involving sexual assault and harassment. The bill amends the Federal Arbitration Act so that predispute arbitration agreements and predispute class action waivers are no longer valid and enforceable in cases filed under federal, tribal, or state law that relate to a sexual harassment or sexual assault dispute. The statute does not mention or carve out local law.
The statute defines predispute arbitration agreements as “any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement.” The class action waiver, referred to in the statute as a “pre-dispute joint-action waiver", is defined as “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.” These disputes will only proceed to arbitration if the individual or the named representative of a class alleging sexual harassment or sexual assault elects that forum. Notably, nothing in the statute prohibits a class action waiver or agreement to arbitrate that is entered into after a dispute has arisen.
If the application of the law is in question, the determination shall be made under federal law by a court, even if the agreement delegates such determinations to an arbitrator. This is the case regardless of whether the party resisting arbitration challenges the arbitration agreement individually or in conjunction with other terms of the contract containing the arbitration agreement.
This law applies to any dispute or claim that arises or accrues on or after the date the law is enacted, even if the employer and employee had already signed an arbitration agreement prior to the passage of the law. New York, as well as many other jurisdictions, has previously enacted a statute prohibiting employers from requiring arbitration of sexual harassment and other discrimination claims. To date, many courts in New York have found this statute preempted by the Federal Arbitration Act. With the passage of this new law, the preemption defense will no longer be available to employers for sexual harassment claims. At this point, it is unclear how broadly the federal law will be interpreted when an employee alleges multiple claims, some of which may fall outside the scope of the law’s prohibition. For example, it is uncertain whether an employee could refuse to arbitrate a retaliation claim because the employee is also alleging a sexual harassment claim.
Employers should review their standard agreements, such as employment and separation agreements, and consider whether revisions to their agreements would be beneficial in light of this new law. Employers should also keep this statute in mind for any future claims relating to sexual harassment or sexual assault, as previously executed arbitration agreements and class action waivers will no longer be enforceable for such claims. Individuals with questions should feel free to contact Caroline Secola at csecola@fglawllc.com or any other attorney at the Firm.
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