On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (H.R. 4445; referred to here as "EFAA"). The EFAA, which Congress passed with strong bipartisan support, amends the Federal Arbitration Act ("FAA") to prohibit employers from using pre-dispute mandatory arbitration agreements to resolve sexual assault and sexual harassment claims. The law does not impact the enforceability of arbitration agreements with respect to legal claims other than sexual assault and sexual harassment, although Congress has proposed another now-pending bill which would expand the categories of employee legal protections, as discussed more fully below.

Key Provisions of the EFAA

Under the EFAA, employers may not enforce pre-dispute arbitration agreements for cases filed under federal, tribal, or state law related to sexual assault or sexual harassment disputes. However, employees may voluntarily elect arbitration as a forum to resolve their sexual assault or sexual harassment claims. Employers also may not use joint, class or collective action waivers in arbitration agreements to bar individuals from participating in class or collective actions related to sexual assault or sexual harassment disputes. The EFAA states that courts, not arbitrators, retain jurisdiction to determine whether an arbitration agreement's provisions relating to sexual assault or sexual harassment and class action waivers are valid or enforceable.

Under the EFAA, a "pre-dispute arbitration agreement" is an agreement to arbitrate a dispute that had not yet arisen at the time the parties entered into the agreement. The terms "sexual assault" and "sexual harassment" refer to conduct involving nonconsensual sexual acts, sexual contact, or conduct that is alleged to constitute sexual harassment under applicable federal, tribal, or state laws.

The law applies to any dispute or claim of sexual assault or sexual harassment that arose or accrued on or after March 3, 2022. In addition, employees who signed arbitration agreements before the law's enactment on this date are not bound by those agreements. The agreements are voidable, meaning that those individuals may proceed to pursue sexual assault or sexual harassment claims in court. However, such individuals can choose voluntarily to use arbitration.

Open Questions

There is some ambiguity in the EFAA's language. The law states, in pertinent part, that: "...no pre-dispute arbitration agreement or pre-dispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute." (Emphasis added)

The terms "a case" and "relates to" are unclear. For example, is a retaliation case premised upon an individual's complaint of sexual harassment barred from arbitration even if the individual never brings a sexual harassment lawsuit? Will a court be expected to determine whether other types of cases "relate to" a sexual assault or sexual harassment dispute, perhaps those including claims involving personal injury, retaliation, or equal pay and wage/hour issues? If a plaintiff brings a variety of discrimination claims, will a court allow the plaintiff to litigate the sexual harassment claims but require arbitration of other discrimination claims, thereby allowing potentially a double-dipping on damages? Employers may need to await court rulings defining the terms "a case" and "relates to" before fully understanding the law's impact.

For employers with multi-step dispute resolution processes that start with mediation and proceed to arbitration, a question now exists about whether such multi-step plans would be inactive, at least with respect to resolution of sexual assault and sexual harassment disputes, thereby undermining possible early resolutions through mediation.

Other Pending Legislation

On March 17, 2022, in an effort to expand upon the success of the EFAA's enactment, the U.S. House of Representatives passed a more far-reaching bill (H.R. 963), the Forced Arbitration Injustice Repeal Act ("FAIR Act"). The FAIR Act would ban all mandatory pre-dispute arbitration agreements for all types of employment disputes - not just sexual assault and sexual harassment - and also for consumer, antitrust, or civil rights disputes. The FAIR Act exempts such provisions in collective bargaining agreements. Note that the complaining party may voluntarily choose arbitration under the proposal.

As with the EFAA, the FAIR Act would also prohibit pre-dispute joint action waivers, including agreements that prevent individuals, workers and small businesses from participating in a joint, class or collective action related to an employment, consumer, antitrust, or civil rights dispute. While the EFAA had strong bipartisan support, the FAIR Act does not at this time, and thus the bill's chances of survival in the Senate remain dubious.

Additionally, U.S. Senator Sherrod Brown has sponsored a bill (S. 3755) entitled Arbitration Fairness for Consumers Act, that would amend the Consumer Financial Protection Act of 2010 to prohibit mandatory pre-dispute arbitration agreements and other agreements and practices that prevent a consumer from participating in joint, class or collective actions for consumer financial product or service disputes.

Scope of Federal Arbitration Act Challenged at U.S. Supreme Court

It bears mention that the FAA's scope and enforceability with respect to workplace law claims is currently under attack in the courts by employees. In fact, the U.S. Supreme Court is considering two such cases. The fate of these cases will impact many other matters pending in the lower courts. Previously, the Supreme Court held that when parties agree to resolve their disputes by individualized arbitration, those arbitration agreements are enforceable under the FAA.

Southwest Airlines v. Saxon, heard by the Supreme Court on March 28, 2022, addresses the types of transportation workers who are properly exempt from the FAA as interstate "transportation workers." Viking River Cruises v. Moriana, scheduled for oral argument on March 30, 2022, will determine whether the FAA requires enforcement of a bilateral arbitration agreement providing that an employee cannot raise claims on behalf of others, including under the California Private Attorneys General Act. 

What Should Employers Do Now?

Short of challenging the EFAA in court, employers should consider whether to re-issue and update enforceable arbitration agreements to provide a carve-out for sexual assault and sexual harassment claims. Employers could also consider simply not enforcing any provision that requires arbitration of sexual assault or sexual harassment claims. Courts in different states may vary as to whether they will "blue-pencil" arbitration agreements that impermissibly mandate arbitration of sexual assault and sexual harassment claims (that is, striking out the objectionable language) or may perhaps find such agreements wholly unenforceable. Employers might also consider whether to introduce the use of jury trial waiver agreements with employees so that matters proceeding to court are heard by a judge, rather than a jury.

As always, employers should confer with their labor and employment counsel regarding:

  • How to proceed with respect to modifying any existing arbitration agreements to resolve employment disputes, the use of arbitration in resolving employment disputes more generally, and whether to consider the use of jury trial waivers;
  • Conducting sexual harassment and retaliation prevention trainings regularly; and
  • Staying abreast of related legal developments at the state and local levels regarding sexual harassment prevention protections for employees. In New York, for instance, Governor Hochul recently signed several bills into law providing greater protections to victims of sexual harassment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.