President Biden signed into law the "Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021" on March 3. As its name suggests, the law prohibits pre-dispute arbitration agreements that require individuals to arbitrate any claim under federal, tribal or state law relating to a sexual assault or sexual harassment dispute. In other words, employers can no longer compel employees to arbitrate sexual assault or sexual harassment claims. Class action waivers are also prohibited with respect to those claims.
The act took effect immediately and applies retroactively to arbitration agreements signed before March 3. However, it only prohibits mandatory arbitration with respect to new sexual assault or harassment claims made after its effective date.
Importantly, if a dispute arises regarding applicability of the new law, the act provides the dispute will be determined under federal law, and that validity and enforcement of arbitration agreements under the act shall be determined by a court, rather than by an arbitrator. Supporters of the act said it gives sexual assault and harassment victims the choice to pursue their claims in court rather than in a confidential arbitration, should they choose to do so.
What does this mean for employers that include mandatory arbitration clauses in their employment or confidentiality agreements? While mandatory arbitration clauses covering all claims (including sexual harassment claims) will not be found unenforceable in their entirety for including the prohibited claims, employers should review their agreements and consider excluding sexual assault and harassment claims from the mandatory arbitration requirements. Employers should also consider whether they are subject to any state laws that prohibit mandatory arbitration of certain claims in the event those state law prohibitions are more restrictive than those under the new federal law.
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