New Federal Law Curtails Arbitration of Sexual Assault and Sexual Harassment Claims
California employers should be on alert that President Biden signed new legislation curtailing the arbitration of sexual harassment and sexual assault claims. Titled the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act,” the new legislation was passed by Congress as H.R. 4445 and signed into law by the President on March 3, 2022. The bipartisan motivation behind H.R. 4445 was to give survivors of sexual abuse their day in court and eliminate the secretive element of arbitration that often shields these accusations from public scrutiny.
H.R. 4445 ushers in a sea change to arbitration law. In California, arbitration agreements are ubiquitous and routinely signed by employees during the onboarding process. Arbitration agreements typically mandate that all workplace disputes be litigated and resolved in a private arbitration rather than a court of law. Arbitration agreements also typically include a class, collective, and representative waiver preventing each employee from representing any person other than themselves in their own arbitration. Together, the arbitration agreement and class waiver are effective tools to manage workplace litigation risks. This practice is currently protected by the Federal Arbitration Act (“FAA”), which almost universally enforces arbitration agreements with class, collective, and representative waivers, subject to narrow legal defenses under contract law and narrow exceptions for certain types of claims.
H.R. 4445 amends the FAA by exempting sexual harassment and assault claims from arbitration agreements and “joint-action” (i.e. class, collective, and representative) waivers under certain conditions. It does so by giving the accuser, and the accuser alone, the right to “elect” to invalidate the arbitration agreement or joint-action waiver in a sexual harassment or sexual assault case. In reality, every accuser will elect to invalidate these agreements. The fact that the agreements are not invalid until the accuser elects it may be an important distinction for upholding the legality of agreements challenged on other grounds.
Importantly, the new legislation only covers “predispute” agreements, meaning arbitration agreements and joint-action waivers executed before the dispute at issue arises. In the employment context, where agreements are usually part of the onboarding packet, most agreements will be “predispute.” But any agreement entered after the claim arose—for instance, a revised arbitration agreement signed after a sexual harassment incident occurred—is unlikely to be affected by H.R. 4555.
Additionally, the legal subject matter covered by H.R. 4445 is broad. A “sexual assault dispute” includes any dispute involving a nonconsensual sexual act or sexual contact prohibited by federal criminal law or similar tribal or state law. A “sexual harassment dispute” includes any dispute constituting sexual harassment under federal, tribal, or state law.
It is also important to note that H.R. 4555 applies prospectively and not retroactively, as it expressly states that the legislation will apply to claims arising or accruing on or after the date of enactment. This means that a predispute agreement is still valid against any sexual harassment or assault claims that “arose” and “accrued” before the law passed. This is certain to become a flashpoint for litigation contesting when claims actually arose and accrued.
Finally, H.R. 4445 applies to a “case” that “relates to” a sexual assault dispute or sexual harassment dispute. It is not clear whether this means that an entire lawsuit is shielded from arbitration, or whether the court must keep the sexual harassment or sexual assault causes of action in court and send the rest to arbitration. Until this question is resolved, Plaintiffs might strategically add irrelevant sexual harassment or sexual assault allegations to commonplace employment lawsuits in an attempt to shield themselves from arbitration.
Employers should bear in mind that H.R. 4445 may not be the last major change to the FAA. In a statement extolling the success of H.R. 4445, the Biden Administration called on Congress to enact similar changes for other workplace claims, such as wage theft, racial discrimination, and unfair labor practices. For now, employers should prepare for the impact of H.R. 4445. Revisions to arbitration agreements may be in order in light of H.R. 4445. Employers with questions regarding the business implications of H.R. 4445 or the use of arbitration agreements to manage workplace disputes may contact the authors of this Alert or their usual employment counsel at AALRR.