Highlights

President Biden is expected to sign the recently passed law prohibiting mandatory arbitration of claims of sexual harassment and sexual assault

Previously signed agreements requiring arbitration will be unenforceable

Employers should review and modify their agreements to comply with this new law

Congress has passed a bill aimed at ending mandatory arbitration agreements for sexual assault or sexual harassment claims. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act passed the U.S. Senate recently with broad bipartisan support. President Biden is expected to sign the bill into law in the near future.

The act will prohibit mandatory arbitration of claims that relate to sexual assault or sexual harassment, regardless of whether they are filed pursuant to federal, state, or tribal law. It also invalidates agreements that waive an employee’s right to participate in a class action claim based on such allegations. 

Previously signed mandatory arbitration agreements and joint-action waivers will be unenforceable regarding such claims once the bill because law. Employees will have the right to choose whether to proceed in litigation or arbitration. Moreover, when an employer attempts to enforce a mandatory arbitration agreement and asserts that an individual’s claim is not a sexual assault or sexual harassment claim, under the new law it will be a judge, not an arbitrator, who will make that determination.

Employers who rely on mandatory arbitration clauses and joint-action waivers to avoid lawsuits and related exposure will need to consider changing their approach. While an employee may still choose arbitration, an employer cannot compel it, and employers will need to prepare for the substantial negative press that frequently accompanies sexual assault and sexual harassment claims. 

Employers should consider reviewing any mandatory arbitration clauses and joint-action waivers to ensure that sexual harassment and sexual assault claims pursuant to federal, state, or tribal law are removed from the agreements. Employers who already have such agreements in place should be prepared for them to be held unenforceable for any claim related to sexual assault or sexual harassment.

While the law has widespread implications in the employment context, it is not limited to employment relationships. It also applies to independent contractors, patients, customers and any other individual with whom a business might attempt to enforce mandatory arbitration.