For many years, employers have relied on the Federal Arbitration Act (“FAA”) and pre-dispute arbitration agreements to require employees to privately arbitrate disputes, rather than pursue them in the judicial system or participate in class actions.
That is no longer possible when the employee’s claim involves sexual assault (as defined in federal law) or sexual harassment (as defined in Federal, Tribal, or State law).
On March 3, 2022, President Biden signed H.R. 4445, amending the FAA to provide that a person pursuing a dispute based on sexual harassment or sexual assault allegations may elect to have any mandatory arbitration provisions rendered unenforceable. That is, at the employee’s option, the employee may pursue their claims in court rather than mandatory arbitration, even if they signed a mandatory arbitration agreement with the employer. This is true regardless of whether the dispute is brought under Federal, Tribal, or State law.
Additionally, if an employee’s claims involve sexual harassment or sexual assault, employers can no longer enforce joint-action waiver provisions in which the employee waived the right to participate in joint, class, or collective actions (whether a lawsuit, arbitration, or other forum).
The determination of whether this new law applies to an employee’s claims (that is, whether the dispute involves sexual assault or sexual harassment claims) will be made by the court and not the arbitrator, even when the arbitration agreement delegates that decision to the arbitrator.
This new section applies to any sexual assault or sexual harassment dispute that arises or accrues after the date of enactment (March 3).
Whenever an employee is pursuing any claim of sexual assault or sexual harassment, the employer is not going to be able to force that dispute into arbitration or out of a class action situation based on an arbitration or joint-action waiver agreement. However, employees may still prefer arbitration of these types of disputes, and only the employee can elect to render such a pre-dispute arbitration agreement unenforceable. Employers do not need to revise their arbitration agreements or joint action waivers, but they do need to be aware that in this one area, they will not be able to enforce them against an employee who wants to be in court instead.