Employers Prohibited from Requiring Arbitration for Sexual Misconduct Claims

Earlier this month, President Biden signed into law the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (“the Act”). The Act amends the Federal Arbitration Act (FAA) to give employees who have arbitration agreements with their employers the option of bringing claims of sexual assault or sexual harassment either in arbitration or in court.

Arbitration is a binding resolution process where the parties present their claims to an arbitrator rather than a court. Arbitration is preferred by some employers, as most court proceedings are public record, and arbitration is private.

The Act amends the Federal Arbitration Act, which generally favors arbitration of employment-related disputes, so that employers cannot require arbitration for sexual harassment or sexual assault claims. However, the Act does not limit employees’ ability to choose to submit their disputes to arbitration rather than court proceedings.

The Act applies retroactively. Therefore, existing contracts between employees and employers that have provisions to arbitrate sexual harassment or assault disputes will be considered invalid and unenforceable. It is unclear whether employees raising other claims, along with their sexual harassment and/or sexual assault claims, will have the option of also litigating these additional claims. Under the Act, the sexual harassment and/or sexual assault claim(s) may have to be litigated in court, but the other claim(s) potentially could proceed in arbitration pursuant to a valid arbitration agreement. Under such a scenario, employers would need to decide whether to permit all claims to proceed to court or whether to split the claims between the two forums. In such cases, where parties disagree, courts would need to decide which claims must be litigated and which, if any, may be arbitrated. If split, the court might also need to determine, among other things, the order of proceedings and whether to stay proceedings for one set of claims pending the outcome of the other.

Employers should review existing agreements to see if they need to make changes. Employers that wish to continue to utilize or implement mandatory arbitration provisions should include language acknowledging that the compulsory arbitration provisions do not apply to disputes involving alleged sexual harassment or misconduct.