On March 3, 2022, President Biden signed into law the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (also known as H.R. 4445). H.R. 4445 amends the Federal Arbitration Act (“FAA”) to prohibit employers from entering into pre-dispute arbitration agreements for claims alleging sexual assault or sexual harassment. It also prohibits employers from including waivers of the right to bring such claims on a joint or class basis.
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 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:
- The bill addresses only pre-dispute arbitration agreements involving sexual assault or sexual harassment claims. That is, employers and employees may still enter into arbitration agreements after the alleged sexual assault or sexual harassment "arises" or "accrues."
- The bill allows the alleged aggrieved party of sexual assault or sexual harassment to choose the forum where they want to have their claims adjudicated, whether in court or arbitration. In other words, the alleged aggrieved party may choose to invoke the arbitration clause and proceed in arbitration or proceed in court.
- The enforceability of an arbitration agreement or class/collective action waiver must be determined by the court, not an arbitrator, irrespective if the arbitration agreement purports to delegate this determination to an arbitrator.
- The bill does not apply retroactively. As such, H.R. 4445 does not invalidate pre-dispute agreements against sexual assault and sexual harassment claims that "arise" or "accrue" before the bill was signed into law.
- Finally, the bill applies "to a case" that "relates to the sexual assault dispute or the sexual harassment dispute." The bill does not make clear whether this provision means that an entire lawsuit that includes claims of sexual assault or sexual harassment, along with other common employment claims such as discrimination and wrongful discharge, must be adjudicated in civil court. Or, rather, are the sexual assault or sexual harassment claims adjudicated in court and other employment claims allowed to be adjudicated in arbitration?
Due to the ambiguous statutory language, employers may see an influx of cases where employees insert claims for sexual assault or sexual harassment in cases concerning other common employment claims in an attempt to prevent their lawsuit from being adjudicated in arbitration.
Employers should review existing pre-dispute arbitration agreements to determine whether revisions may be needed in light of the new law. This could include adding carve-outs for sexual assault or sexual harassment claims or language that expressly provides the employee’s rights to elect to bring sexual assault or sexual harassment disputes in court or arbitration, or making other updates to ensure that the agreement can be enforced as to other types of claims.
Employers should also keep an eye out as to whether the Ninth Circuit grants a petition for rehearing en banc after a divided Ninth Circuit panel found the Federal Arbitration Act did not completely preempt Assembly Bill 51, California’s ban on mandatory arbitration agreements. But note, last month the Ninth Circuit issued an order deferring consideration of the petition until the U.S. Supreme Court rules on Viking River Cruises, Inc. v. Moriana – oral argument has been scheduled for later this month (March 30, 2022).
Should you have any questions or require assistance to comply with this new law, feel free to reach out to us.