Congress recently passed a bill that will greatly limit the use of arbitration for claims involving sexual assault or sexual harassment. Titled "Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021," H.R. 4445, which passed with bipartisan support, prohibits enforcement of pre-dispute mandatory arbitration and joint class action waiver clauses for claims alleging sexual assault or sexual harassment subject to arbitration under the Federal Arbitration Act ("FAA").
After President Biden signs the bill into law, which is expected to happen soon, H.R. 4445 will be effective immediately.
Impact of H.R. 4445 for Employers
For years, many employers have used mandatory arbitration agreements for employment-related claims, including class action waivers. These have been permissible and enforceable under the FAA. H.R. 4445 seeks to change that result by allowing victims of sexual assault or sexual harassment to have their claims adjudicated in court rather than the more confidential setting of private arbitration.
Specifically, H.R. 4445 amends the FAA, as follows:
What Employers Should Know
In anticipation that President Biden will sign the bill into law and that it will be effective immediately, we recommend employers take the following steps to prepare:
- Carefully review and revise existing arbitration agreements to ensure consistency with the expected amendments to the FAA.
- Closely monitor state law developments for further restrictions as various states, including California, are considering more draconian legislation that may prohibit arbitration agreements altogether.
- When confronted with a sexual assault or sexual harassment claim, employers should contact legal counsel to assess the application of the bill. H.R. 4445 does not ban all mandatory arbitration clauses—it only invalidates those clause(s) with respect to sexual assault and sexual harassment claims, even if the alleged aggrieved party signed an otherwise enforceable arbitration agreement.
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