Earlier this month, Congress passed a bill that will effectively end mandatory arbitration in workplace sexual assault and harassment cases, providing employees with a choice of proceeding with their claims in either court or via arbitration.  The legislation, Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“Act”) was passed by a bi-partisan majority in the House and Senate and is expected to be signed into law by President Biden.  This law is significant as there are an estimated 60,000,000 workers in the United States who are subject to arbitration clauses, many of whom do not even realize it.

Key Takeaways for Employers

This Act will amend the Federal Arbitration Act to allow employees to (1) invalidate mandatory arbitration clauses in “pre-dispute arbitration agreements” (i.e., employment agreements, employee handbooks, or offer letters) that apply to claims of sexual harassment or assault and (2) invalidate any waiver on their right to proceed in a joint, class or collective action, with respect to such claims. The legislation covers all claims of sexual harassment or assault, whether they arise under federal, state, or tribal law.

The Act takes effect immediately upon signing by the President and applies to any claims or disputes of sexual assault and harassment arising after the Act becomes law.  This means that even if employers have mandatory arbitration agreements in place with employees at the time the Act is signed into law, employees may, upon the Act’s effective date, unilaterally invalidate any requirement that they arbitrate claims for sexual harassment or assault arising after the Act’s effective date.  Instead, employees may elect to proceed in court with these claims.  Importantly, though, the Act also allows employees to elect to proceed with arbitration consistent with an agreement; the decision rests with the employee.  Some employees may prefer the confidentiality of the arbitration process over a public court setting and may prefer a swifter resolution of the claim through the arbitration process.

At present, it is unclear whether the Act will allow an employee to elect to litigate only claims for sexual assault or harassment, or whether the employee may elect to litigate any and all employment claims in court, assuming at least one of the claims is for sexual assault or harassment.  For example, an employee may have claims against an employer based on theories of race discrimination and sexual harassment.  As written, the Act only allows employees to invalidate the arbitration requirement with respect to claims or sexual assault and harassment.  However, it may be that a court will grant an employee’s request to litigate both in court, in order to avoid unnecessary duplicate proceedings.

Next Steps

Employers with arbitration agreements and/or class action waivers in place with employees should review these contracts and determine whether the Act will render them invalid or unenforceable.  Employers may want to revise these agreements to expressly carve out sexual assault and harassment claims in order to bring the agreement into compliance under the Act.

In addition, all employers, whether they have mandatory arbitration agreements or class action waivers in place or not, may want to review their existing policies on harassment.  This Act is a direct outcome of the #metoo movement.  This movement has had a substantial impact on what employees expect from employers in terms of anti-harassment policies, anti-harassment training and proper workplace investigations.  Employees across the country have a much lower tolerance for any violations of harassment policies, and they expect employers to be proactive in communicating the work rules and expectations on this topic.  At this point, all employers should have well-established complaint-reporting protocols in the workplace for sexual harassment, provide periodic anti-harassment training to supervisors and employees, and ensure they have an effective investigation process in place in case a complaint of harassment is lodged.