President Biden recently signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”) into law. The Act amends the Federal Arbitration Act (FAA) to make pre-dispute arbitration agreements for sexual assault and sexual harassment claims invalid and unenforceable. However, Plaintiffs in these cases have the option to elect to arbitrate after a claim has been asserted. Given this change, employers should review their arbitration agreements and make any necessary revisions to avoid the risk that the agreements will be invalidated in actions involving sexual assault or harassment.

More specifically, the Act bans all “Predispute” Arbitration Agreements and “Joint-Action Waiver[s]” which “relate to the sexual assault dispute or the sexual harassment dispute,” and which have “not yet arisen at the time of the making of the agreement.” The Act does not apply to employment-related arbitration provisions that do not require the arbitration of sexual assault and/or harassment claims. However, a broadly worded agreement can cover those types of claims even if they are not expressly mentioned. Both “sexual assault” and “sexual harassment” are defined broadly to include any definition of these terms under “Federal, Tribal, or State law,” criminal or civil.

While the implications of these provisions have not been fleshed out, it is likely that any class or collective action waivers will be invalidated if the case involves a sexual harassment or sexual assault dispute. What is more uncertain, however, is how this law will effect litigation involving sexual harassment and other related claims like discrimination and retaliation. The Act does not specify whether these related claims can be compelled to arbitration. Employers may have to wait for the courts to decide this issue, however, it is possible that the some related claims can be compelled to arbitration while the sexual harassment or assault claims remain in court.

The Act applies to “any dispute or claim that arises or accrues on or after the date of enactment [March 3, 2022].” Accordingly, the Act will not apply to claims that existed prior to March 3, 2022. However, if an employee signed an arbitration provision prior to that date, the Act would still apply to sexual harassment and/or sexual assault claims that arose on or after March 3, 2022.

More Changes to Arbitration Agreements May be Coming

For California employers, there is further uncertainty regarding mandatory arbitration agreements with employees. In 2019, California passed AB 51, which banned all mandatory employment arbitration provisions. AB 51 is currently stayed pending a rehearing before the Ninth Circuit. If the Ninth Circuit orders that can AB 51 become effective it will call mandatory employment arbitration provisions into question unless that decision is later stayed pending an appeal to the Supreme Court.

Additionally, the United States Supreme Court will soon hear arguments regarding the enforceability of arbitration agreements relating to PAGA claims in Viking River Cruises v. Moriana. If the Supreme Court concludes that PAGA claims can be compelled to arbitration, employers should consider amending their arbitration agreements to allow them to compel PAGA claims to arbitration. While compelling these claims to arbitration may not beneficial for every employer, it is worth evaluating should a favorable decision be issued.

Stradling Has Resources To Help You Stay Compliant

We will continue to keep you advised of developments in the laws applicable to arbitration agreements. In addition to reviewing their arbitration agreements to ensure compliance with the Act, employers should stay alert to further developments so arbitration agreements can be revised to keep pace with changes in the law.