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Landmark new federal law bans mandatory arbitration and class action waivers for cases involving sexual harassment and sexual assault

On February 10, 2022, the Senate passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, H.R. 4445.  It is expected to be signed by President Biden shortly.  The Act did the seemingly impossible by passing on lopsided, bipartisan votes in both the House and Senate, befitting its odd-couple Senate sponsors: Kirstin Gillibrand (D-NY) and Lindsey Graham (R-SC).  The Act makes all pre-dispute arbitration agreements and class action waivers—including those already in existence—unenforceable in cases alleging sexual harassment or sexual assault.  It is a landmark regarding employment arbitration, which has in recent years moved toward allowing more and more mandatory arbitration, not less.

The Act is worded to have a broad reach.  It applies to all arbitration and class, collective, and joint action waivers signed before the time a dispute arises, such as those signed at hiring.  Under the Act, “sexual assault dispute” includes any claim “involving a nonconsensual sexual act or sexual contact,” while “sexual harassment dispute” includes any claim “relating to conduct that is alleged to constitute sexual harassment.”  As written, this could include any claim that simply alleges conduct that could be sexual assault or sexual harassment, even if that is not the main claim being made, such as allegations of inappropriate touching or comments supporting a more straightforward, disparate-treatment sex-discrimination claim.  Moreover, the Act contains no threshold burden of proof for these allegations before the Act applies, meaning an employee would simply have to allege such conduct occurred to avoid mandatory arbitration. 

The Act applies to “a case” relating to sexual harassment or sexual assault filed under any federal, state, or tribal law, bringing the entire lawsuit, not just the actual sexual harassment or sexual assault related claim, into court.  Whether the Act applies to a particular case must be determined by a court, not an arbitrator, even if the case is already in arbitration or the agreement delegates such decisions to the arbitrator.  The Act applies to any dispute that arises or accrues on or after the date the Act is signed into law, even if the agreements were signed before the Act was passed.  It does not apply to actions already pending. 

With this new Act, some of the most hot-button and high-profile cases out there—the kinds of cases employers would most like to resolve confidentially—will now have to take place in the public spotlight.  Employers with mandatory arbitration agreements and class or collective action waivers in their hiring documents could consider other options, such as presenting such agreements later in employment or replacing them with less compulsory agreements, such as pre-litigation mediation agreements or other grievance procedures to resolve employee disputes before they become litigation.  Employers should also ensure they have strong anti-harassment policies, training, and investigation procedures in place to stop these issues from arising in the first place. 

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