Senate Passes Bi-Partisan Bill Prohibiting Mandatory Arbitration of Employee Sexual Misconduct Claims

Types : Alerts

Congress has taken legislative action to provide employees with sexual misconduct claims with a path to litigate these claims in court – a public forum – rather than in a private arbitration.  This legislation is a result of the #MeToo movement that has swept through the United States over the past several years, sending a passionate message to corporate America that these types of claims should be litigated openly.

On February 10, 2022, the Senate passed the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act,” S. 2342 (the “Act”), which passed in the U.S. House of Representatives on February 7, 2022.  Because President Biden is expected to sign the bill promptly, companies proactively should begin to evaluate any mandatory arbitration language in their employee agreements.

What does the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act change?

 This Act amends the Federal Arbitration Act and prohibits mandatory arbitration of disputes involving sexual assault and sexual harassment in the workplace, by making pre-dispute agreements over these claims unenforceable.[1]  Essentially, employees can no longer be forced to waive their rights to file a lawsuit for a workplace sexual assault or harassment dispute, or be required to agree to a mandatory arbitration clause in an employment agreement.  This Act, therefore, effectively nullifies existing mandatory arbitration provisions for sexual harassment claims, including those brought in the form of a joint or class action.

Employees who previously signed an employment agreement with this type of mandatory arbitration language will not be bound by it.  As a result, employees will be able to bring sexual assault and harassment claims directly to a court.  While employees may still voluntarily choose to proceed with arbitration, they cannot be required to do so for sexual misconduct claims, either as a condition of their employment or otherwise.

Practically speaking, companies should also be aware of two additional mechanisms of the Act:

• In the event of a dispute over whether the Act applies to a particular workplace sexual misconduct claim, the Act provides that a court will determine the applicability of the Act to the agreement, rather than an arbitrator. If a court determines that the Act applies, the case will proceed in court; if the Act does not, then the employer may require that the claim proceed in arbitration.
• The Act applies to all workplace sexual assault and harassment claims filed after the Act’s effective date, regardless of when the alleged conduct occurred. 

If President Biden signs the Act into law, what should I do to ensure compliance?

Companies should prepare for this new legislation to become the governing law relating to their arbitration agreements with employees.  If a company currently has mandatory arbitration language in an employment agreement, then the company should carve out exceptions to mandatory arbitration for any employee claim of sexual misconduct arising from the workplace, including sexual harassment and sexual assault.

Companies also will need to modify mandatory arbitration language in existing agreements and plan to inform employees that mandatory arbitration no longer applies to certain claims.  If employees already have signed employment agreements that are invalidated by the Act, then companies should develop a communications plan that will inform employees of the change to their employment agreement.  Companies are encouraged to consult with legal counsel on any alterations to employment agreements and the communication plan to employees.

Additionally, companies should prepare to potentially be forced into court more often, either for the determination of the applicability of the Act or to litigate the sexual misconduct claim.  Proactive and early evaluation of whether a claim is governed by the Act can help companies reduce unnecessary disputes with employees about the proper forum for a sexual misconduct claim.  Robust internal investigation and anti-harassment policies can further bolster the company’s prevention of sexual misconduct at work, and ideally should help mitigate legal risk surrounding these types of claims.

Montgomery McCracken’s Labor and Employment attorneys routinely counsel companies on employment agreements and company policies and are available to confer with companies about how the Act impacts a company’s specific agreements, processes, or procedures relating to employee sexual misconduct claims.

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[1] “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” H.R. 4445, 117th Cong., available at https://www.congress.gov/117/bills/hr4445/BILLS-117hr4445eh.pdf.