Employer advocates have historically relied upon the Federal Arbitration Act (FAA) as a basis for requiring that employees arbitrate most employment-related complaints (rather than litigate those claims in court). In response to that reality, President Biden recently signed into law H.R. 4445, amending the FAA. This new law makes pre-dispute arbitration agreements or joint-action waivers invalid and unenforceable “with respect to a case which is filed” and “relates to” a sexual assault or sexual harassment claim. In other words, employers will no longer be able to compel an employee to arbitrate a sexual assault or sexual harassment claim, and employees can now elect between arbitration or court. The amendment is largely a continuation of the “Me Too” movement, as the arbitration process is less public. The law may have a significant impact on the prosecution of such claims for some estimates suggest that over half of nonunion private-sector employers utilize some form of mandatory arbitration process. Here is what employees and employers should know about this new law:
- Coverage. Under the amendment, a sexual harassment dispute is defined as “a dispute relating to conduct that is alleged to constitute harassment under applicable Federal, Tribal, or State law” and a sexual assault dispute is defined as “a dispute involving a nonconsensual sexual act or sexual conduct.” For all such disputes arising after March 3, 2022, arbitration agreements and class waivers are no longer enforceable.
- Bundling Claims. Employment disputes can often involve multiple claims relating to more than one protected class status. Because the amendment provides that no pre-dispute arbitration agreement or class or collective waiver is enforceable with respect to a case relating to sexual assault or harassment, there may be disputes about which claim(s) are covered and which are not. To this end, the amendment establishes that it will be up to judges, not arbitrators, to decide which claims fall under the act—and therefore which claims must be argued in court.
Note while the amendment only bars forced arbitration of sexual assault and harassment claims, plaintiffs may try to invalidate broad arbitration agreements that do not specifically comply with this new legislation. Accordingly, it would be wise for employers to review and revise any existing arbitration and employment agreements to ensure compliance with the FAA amendment.
The Biden Administration has since issued a Statement of Administration Policy, indicating their desire to end forced arbitration for other employment law claims—including discrimination on the basis of race, wage theft, and unfair labor practices. Thus, H.R. 4445 may be a sign of things to come.
If you have any questions about how the information in this article may affect you or your business, please contact Peter Richter at prichter@stroudlaw.com or (608) 257-2281 or your Stroud attorney.
DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.
