Earlier this month, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2022. The Act amended the Federal Arbitration Act to invalidate the terms of any agreement that require arbitration of claims of sexual assault or sexual harassment.
Prior to the enactment of this Act, employers were free to require employees to sign arbitration agreements as a condition of their employment that mandate most employment disputes, including allegations of workplace sexual harassment, be submitted to arbitration. While employers may still require such agreements, those agreements will no longer force arbitration of sexual harassment or sexual assault claims.
Defending employment claims in an arbitration is significantly less costly, which is one reason many employers require employees to sign arbitration agreements. Many arbitration agreements also limit the breadth of discovery that the two sides can undertake. Arbitrations are also conducted in private, so an employer’s skeletons remain in the closet. Lastly, an arbitration is decided by a lone arbitrator, or sometimes a panel, instead of a jury. All of these factors combine to decrease the potential settlement value of a sexual harassment claim.
The Act applies to all claims that occur after March 3, 2022. Existing arbitration agreements in such cases are not void, nor is any such agreement going forward. Rather, the effect of the Act is that an employee has the right to either arbitrate the claim or proceed with a civil suit in court.
On its face, the Act only applies to sexual assault and sexual harassment claims. That said, concerns about economy, not to mention the advantage to a plaintiff, will likely lead to litigation over whether an employee who has other claims is required to arbitrate those claims, while simultaneously litigating sexual assault or harassment claims.
The Act also only applies to “pre-dispute” agreements and parties are free to later enter into a binding agreement to arbitrate.