On March 3, President Joe Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, which amends the Federal Arbitration Act. Essentially, the act allows an individual asserting sexual assault or sexual harassment claims to elect to bring such claims to court, or to join in a class or collective action predicated on such claims, even if the individual had previously agreed to mandatory arbitration or waived participation in a class or collective action. Because of its application to claims of sexual harassment, the act may have a large impact on the arbitration agreements employers often ask employees to execute and on the advice employers’ counsel provide on such agreements.
The act intends to encourage compliance with laws prohibiting sexual assault or sexual harassment by using the threat of public lawsuits to motivate employers and other entities to be more proactive in their efforts to prevent instances of assault or harassment.
The act states, in pertinent part: “[A]t the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable 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.”
The act defines “sexual assault dispute” as a dispute involving a nonconsensual sexual act or sexual contact. Likewise, the term “sexual harassment dispute” is defined as a dispute relating to conduct that is alleged to constitute sexual harassment under applicable federal, tribal or state law. This would include laws like Title VII of the Civil Rights Act of 1964 or Indiana’s civil rights laws.
What employers need to know
As the act applies directly to sexual harassment claims, it will likely have a sizable impact on the arbitration agreements entered into by employers and employees. In addition to its main provisions, employers should know the following about the act:
1. The act is effective immediately and applies to any claim that arises on or after March 3. This means the act applies to all existing predispute arbitration agreements, even those signed before its enactment. When determining if the act impacts the arbitrability of a certain claim, the operative question is when the claim of sexual assault or harassment arose, not when the predispute agreement was executed.
2. The act provides that a court, not an arbitrator, will decide questions about the applicability of the act to a certain claim or the validity and enforceability of an agreement to arbitrate. This limitation applies regardless of any language in the agreement to the contrary. Having to go to court over questions of applicability or enforceability may significantly increase the time and costs involved in defending a claim of sexual harassment.
3. The act does not make predispute arbitration agreements per se unenforceable. Rather, it gives the employee the power to decide whether his or her claim of sexual harassment will be heard by an arbitrator or a court. Agreements to arbitrate sexual assault or harassment claims may still be enforced if the individual alleging sexual assault or harassment consents to arbitration after the claim is asserted.
Questions that remain
Often, complaints alleging sexual assault or harassment also allege other claims. In that situation, the act does not currently make clear whether the individual bringing the complaint may avoid arbitration as to only the sexual assault or harassment claim(s) or the entire complaint. As quoted above, the act provides that “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable 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.” Arguments between parties over the definition of a “case” in this context are likely.
While the act does not require employers to amend existing predispute arbitration agreements, given the questions that remain regarding the act’s applicability to multicount complaints, counsel may consider encouraging employers to amend their predispute arbitration agreements to clearly state what claims will be determined by an arbitrator and what claims the employee may choose to be heard by a court in the event the employee files a multicount complaint alleging, in part, sexual harassment or sexual assault.
Further, because the act allows the employee to choose whether to arbitrate claims of sexual assault or harassment, counsel may consider encouraging employers to instruct employees on the benefits of arbitration so the employee can make an informed choice should the need arise.
Finally, counsel may consider encouraging employers to revisit their policies and training programs related to workplace harassment, and remind their workforces of those policies and programs, in an effort to maintain or increase compliance with applicable federal, tribal or state law.
Counsel should remain up to date on developments impacting the enforceability and drafting of predispute arbitration agreements or class or collective action waivers, as new precedent will inevitably emerge through cases interpreting the act.•
Alyson St. Pierre is an associate in the Indianapolis office of Dinsmore & Shohl LLP. Opinions expressed are those of the author.