Following quickly on the heels of several changes affecting the enforceability of employee arbitration agreements from last fall (which I wrote about in the Winter Edition), Congress recently created an option for employees to opt out of arbitration agreements in cases of sexual assault or sexual harassment. Employers should update their employee arbitration agreements accordingly.
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (H.R. 4445) continues the recent trend of chipping away at the enforceability of employee arbitration agreements, now at the national level.
The broad takeaway from the new law is that individuals bringing sexual assault and sexual harassment claims who entered into arbitration agreements or class/collective action waivers before their claims arose now have the option to reject those agreements and instead bring those claims in court or through a class/collective action.
However, the law’s language has some ambiguities that make its breadth unclear:
- The law exempts “cases” and not “claims” from arbitration, which raises the question of whether courts will split certain claims from a case into two separate venues, with sexual assault/harassment claims staying in court while other claims go to arbitration. Otherwise, the entire case may be kept in court, so long as the dispute includes at least one sexual assault/harassment claim.
- The law exempts from arbitration claims that “relate to” sexual assault or harassment. But without further definition of “relate to,” it remains to be seen whether a claim that remotely involves issues of sexual assault or harassment (e.g., discrimination, retaliation) must be litigated in court, just as those which directly assert those claims.
- The law applies to claims that “arise or accrue” after March 3, 2022, which leaves an open question as to when a claim “arose or accrued” and consequently, whether the claim would be subject to arbitration.
Some other key facets of the new law:
- The law only applies to arbitration agreements entered into before the sexual assault/harassment claims “arise or accrue.” Parties remain free, however, to mutually agree to arbitration after a claim has been asserted.
- Only courts (not the arbitrators themselves) can decide whether the law applies to the dispute and whether the arbitration agreement governing the dispute is enforceable. This is the case regardless if the arbitration agreement grants the arbitrator the power to determine whether the claims are subject to arbitration.
These uncertainties created by the new law will have to be tested by the courts, and those rulings will help shed light on its scope and impact on employers.
Related practice team: Labor and Employment
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