Congress recently passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, and it is expected to be signed into law by the President.  The Bill allows employees who previously entered into agreements requiring all employment disputes to be arbitrated to elect to litigate sexual assault and sexual harassment claims in court instead.  In addition, if the employment agreement prospectively waived the employee’s right to joint action, he or she could decide to nullify that agreement as it relates to sexual assault or sexual harassment claims.  Employees could still arbitrate if they preferred, but the Bill ensures they have the option of filing such claims in court.

Although the proposed law only applies to disputes that arise after its effective date, the option to opt-out of arbitration provisions applies to agreements that were entered into before the effective date of the Bill. This means that employers who have arbitration provisions as standard parts of their employment agreements may want to reconsider their inclusion if the primary purpose was to protect the Company from potentially embarrassing allegations of sexual harassment or assault.

We will continue to monitor these developments and any additional guidance that comes out about the law, including whether employers may have an affirmative obligation to notify employees of their right to avoid arbitration for sexual assault and sexual harassment claims.