In our last alert, What Should Employers Expect in 2022, Non-COVID Edition, we predicted the Senate would pass the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, House Resolution 4445 (the Act), which had already passed in the House. The Senate swiftly confirmed this prediction and passed the Act on February 10, 2022. Given the Biden Administration’s previous expression of support for the Act, the President is expected to sign it into law soon.
The Act will render mandatory arbitration agreements and class action waivers unenforceable with respect to workplace sexual assault and sexual harassment claims, allowing workers to bring public lawsuits against their employers under those circumstances. Summarized below are the key takeaways of the Act, unanswered questions, and practical guidance for employers.
Key Takeaways
The Act was inspired by several workplace sexual harassment claims involving high-profile figures that have been shielded from public scrutiny through mandatory arbitration agreements. Mandatory arbitration agreements, either as stand-alone agreements or included in employment contracts, typically require that disputes be addressed in arbitration (an out-of-court, generally confidential process that legally binds the parties). Employers often prefer arbitration over court proceedings because arbitration can be more predictable, help secure confidentiality of disputes, and potentially reduce costs.
Claims Covered
The Act renders arbitration agreements and class-action waivers unenforceable with respect to claims of sexual assault and sexual harassment. Sexual assault is defined broadly under the Act and includes disputes involving nonconsensual sexual acts or sexual contact, including (but not limited to) when the victim lacks capacity to consent. Sexual harassment is defined to include any harassment based upon a person’s sex — including unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. It also includes harassment that is not “sexual” in nature, such as offensive remarks about a person’s sex.
The Act does not apply to claims of discrimination based on any protected characteristic, including discrimination based on sex. For example, if a female employee was not offered an opportunity for a promotion that other similarly situated male employees were, such claim could still be subject to an arbitration agreement. Further, the Act does not apply to harassment claims based on any other protected characteristics (such as race or age).
Impact on Agreements
The Act prohibits arbitration of all future claims of sexual assault or harassment. However, employers and employees may agree to arbitrate sexual harassment claims after the dispute giving rise to a sexual assault or sexual harassment claim has occurred.
Unanswered Questions
Several concerns remain unclear in light of the Act:
- Will Congress extend the Act to mandatory arbitration and class-action waiver agreements relating to claims of other types of discrimination/harassment (such as race)?
- What happens if an employee subject to a mandatory arbitration agreement brings several claims of harassment, one of which is a sexual harassment claim? Will the court wait to adjudicate the claim until the arbitration of the other claims is complete, proceed concurrently with arbitration, or halt arbitration until after the sexual harassment/discrimination claim is resolved?
- How will a court decide cases in which claims of sexual harassment and other types of harassment are inseparable from claims of other types of harassment that are subject to a mandatory arbitration agreement?
Practical Guidance for Employers
Employers should review their employment contracts/arbitration agreements for both current and future employees as soon as possible. If your agreements contain a mandatory arbitration and/or class-action waiver clause, consider taking the following actions:
- Review and evaluate your current agreements to ensure they include a carve-out for non-arbitrable claims under the Act.
- Revise your mandatory arbitration and class-action waiver clauses for future employees to contain a specific carve-out for sexual assault and harassment-related disputes.
- Consider revising your agreements to include a jury waiver (if permitted under applicable state law) for any dispute which is not subject to the mandatory arbitration and/or class-action waiver agreement. This will better position a claim to be heard by a judge and help avoid the unpredictability that can come with a jury.
- Ensure your workplace sexual harassment policies and procedures are up to date and consistently enforced. A properly written policy, consistent training of all employees, and appropriate management reactions to reports or claims can help prevent litigation altogether.
