Earlier this month, President Biden signed into law the “Ending Forced Arbitration of Sexual Assault or Sexual Harassment Act of 2021.” The law is an amendment to the Federal Arbitration Act (FAA). If an employer has policies or mandatory arbitration provisions which require employees to submit their employment disputes to private arbitration, the new law makes that arbitration agreement unenforceable for claims related to sexual assault or sexual harassment.
What does the Act cover?
The Act covers all claims of sexual assault or sexual harassment, whether they arise under federal, state, or local law. The new law states that arbitration provisions requiring an employee to arbitrate sexual assault or sexual harassment claims are not enforceable. This means employees pursuing such claims can sue in court and cannot be forced to adjudicate their claims in private arbitration.
Can employees opt to arbitrate?
The Act does allow workers to elect the arbitration option if they want to. The choice is given to the employee. The new law also requires the courts to decide whether a claim constitutes sexual assault or sexual harassment. The decision is not for arbitrators to make, even if the arbitration agreement states the question is to be determined by an arbitrator.
When does the Act become effective?
The bill was signed into law on March 3, 2022. The law applies retroactively regardless of when the arbitration agreement was entered into by the employer and employee. Any arbitration agreements that predate March 3, 2022, are considered unenforceable for any sexual assault or sexual harassment claims that arise on or after March 3, 2022.
What do employers need to know?
Employers may still use arbitration agreements to resolve employee disputes and claims, including harassment and discrimination claims. The exception is that employees cannot be forced to mandatory arbitration for sexual assault and sexual harassment claims. Employers should review any mandatory arbitration provisions they have in place and evaluate their enforceability in light of this new law.