Landmark legislation allows plaintiffs to invalidate arbitration agreements for sexual harassment and assault claims



March 16, 2022

Labor & Employment Alert

Author(s): Andrea Chavez, Irene Scholl-Tatevosyan

Employers must prepare for the impact of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act.

What’s the Impact?

  • Under the Act, a plaintiff bringing sexual assault and sexual harassment claims can choose arbitration or a jury trial
  • Employers will have to navigate the changes the Act imposes on employment agreements and potential litigation

With President Biden signing into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the “Act”) on March 3, 2022, employers should review their form arbitration agreements and consider the impact of the Act on potential litigation of sexual assault and harassment claims.

The Act allows a plaintiff bringing sexual assault and sexual harassment claims (whether individually or as a representative of a class or collective action) to invalidate predispute arbitration agreements under the Federal Arbitration Act. This means that the person can choose to arbitrate such claims or bring those claims in court for a jury trial.

Under the Act, “sexual assault dispute” means a dispute involving a nonconsensual sexual act or sexual contact as defined in 18 U.S.C. 2246 or similar applicable tribal or state law, including when the victim lacks capacity to consent. A “sexual harassment dispute” is defined as a dispute relating to conduct that is alleged to constitute sexual harassment under applicable federal, tribal, or state law.

The applicability of the Act is not based on when the arbitration agreement was signed, but rather when the dispute or claim arose. The Act will apply to any dispute or claim that arises or accrues on or after the date of enactment of the Act, i.e., March 3, 2022.

Whether an arbitration agreement subject to the Act is enforceable will be determined by a court, and that court will apply federal law in answering that question, even if the parties have agreed to delegate the question of arbitrability to the arbitrator.

Takeaways

  • The Act does not include general sex discrimination cases (such as issues relating to pay equity, promotions, hiring, and wrongful termination).
  • It is unclear if courts will find the entire arbitration agreement invalid and unenforceable without a carve out for claims related to sexual assault or sexual harassment, or whether courts will limit the potential finding of invalidity and unenforceability to the sexual assault and harassment claims. Given that the Federal Arbitration Act remains intact with respect to other claims, and given that individuals can still choose to bring their sexual assault and harassment claims in arbitration, there does not appear to be any outright ban against including such claims in arbitration agreements. There are no resulting fines or penalties for excluding a carve out of sexual assault or sexual harassment claims from an arbitration agreement.
  • It remains to be seen whether courts will allow arbitration of related claims or claims with closely related facts to the sexual assault or harassment claims.
  • Individuals, such as employees, will be able to pursue their claims in court with a jury instead of a private arbitration that usually is not part of a public record. There are many considerations when facing a jury trial, rather than a private arbitration, and businesses should follow developments on this issue closely.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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