What is Mandatory Arbitration?

Mandatory arbitration clauses and agreements require individuals to pursue potential legal claims through arbitration instead of through the court system.  Such clauses may be included as a part of a larger contract, such as an employment agreement, or they may be separate standalone agreements.  Although they are frequently used in the employment context, mandatory arbitration clauses may also be included in other types of contracts, such as property leases, home improvement contracts, ridesharing apps, and so on.

What Matters

Mandatory arbitration agreements that include claims for sexual assault and/or sexual harassment are now voidable, regardless of the date, the agreement was signed.  Class action waivers governing sexual assault and/or sexual harassment disputes are also voidable.

Changes to Mandatory Arbitration

On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”).  This Act amends the Federal Arbitration Act to make it easier for individuals with sexual assault and/or sexual harassment claims to file a lawsuit in court instead of being required to participate in arbitration, even if they have previously agreed to mandatory arbitration.

The Act defines “sexual assault dispute” as a dispute involving a nonconsensual sexual act or sexual contact, including when the victim lacks the capacity to consent.  The Act defines “sexual harassment dispute” as a dispute relating to “conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” The Act also permits individuals to file a lawsuit on a class-wide basis for sexual assault and/or sexual harassment disputes, even if the individual previously signed an agreement waiving the right to file a class action.  The Act relies on courts to determine whether its provisions will apply to a particular agreement or dispute.

The Act is partially retroactive.  Prior cases that have already been resolved through arbitration cannot be reopened and litigated in court.  However, any existing mandatory arbitration clause or arbitration agreement governing sexual assault or sexual harassment claims is now voidable, regardless of the date the individual signed the agreement.  Of note, the Act does not prohibit the arbitration of sexual assault and sexual harassment claims as long as both parties agree to arbitration.

TAKE ACTION

Employers should review their employment agreements, mandatory arbitration agreements, and class action waivers to determine if any revisions are needed.  Of particular importance is determining whether to exclude sexual assault and sexual harassment claims from mandatory arbitration agreements moving forward and whether existing agreements specify what happens when some claims are subject to arbitration and some are not.

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