On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act), prohibiting employers from enforcing predispute arbitration agreements and class action waivers that concern sexual harassment and sexual assault claims.  The Act amends the Federal Arbitration Act (FAA) with respect to the arbitration of disputes involving sexual assault and sexual harassment.

Key Terms

The Act applies to two types of agreements – predispute arbitration agreements and predispute joint-action waivers (together, Predispute Agreements) – to the extent they govern sexual assault and sexual harassment disputes:

• A “predispute arbitration agreement” is an agreement to arbitrate that is entered into before a sexual assault dispute or sexual harassment dispute arises. It can be a standalone agreement or a provision within a broader agreement, and it can be signed at the outset of an employer-employee relationship or during the course of it.
• A “predispute joint-action waiver” is an agreement that is made before a dispute arises, pursuant to which one of the parties (typically the employee) waives the right to participate in, or is prohibited from participating in, any joint, class, or collective action involving a sexual assault or sexual harassment dispute. Such waivers can be included in arbitration agreements or be standalone agreements, and although they are frequently signed at the beginning of an employer-employee relationship, they can be executed during the course of the relationship.

The Act defines a “sexual assault dispute” as a dispute involving a nonconsensual sexual act or sexual contact, as such terms are defined in 18 U.S.C. 2246 or similar state or tribunal law (including when the victim lacks the capacity to consent), and it defines a “sexual harassment dispute” as a dispute relating to conduct alleged to constitute sexual harassment under applicable federal, state, or tribal law.

Five Key Takeaways

Here are five things employers need to know about the Act:

1. The Act does not invalidate existing Predispute Agreements; rather it gives employees alleging sexual assault or sexual harassment the option to invalidate them and bars employers from enforcing them. The Act preserves an employee’s right to choose to arbitrate his or her claims pursuant to a predispute arbitration agreement.
2. The Act only applies to pre-dispute agreements and waivers. Accordingly, if an employer and an employee enter into an agreement to arbitrate a sexual assault or sexual harassment dispute after the claim arises, that agreement can still be enforced, subject to applicable state law.
3. The Act only applies to claims and disputes that arise or accrue on or after March 3, 2022, the date of the Act’s enactment. Employers may continue to enforce existing Predispute Agreements that arose or accrued prior to that date.
4. Predispute arbitration agreements and class action waivers can still be implemented and enforced with respect to claims that do not involve sexual assault or sexual harassment, such as claims for breach of contract, discrimination and retaliation.
5. Disputes regarding the applicability of the Act to a particular claim will be determined by a court applying federal law, rather than an arbitrator, regardless of what the contract says.

ADDITIONAL INFORMATION

For a more detailed analysis of this legislation, including important considerations for employers who have or are considering arbitration agreements and class action waivers with their workforce, please see this the prior article issued by Gray Reed’s labor and employment group.