In a highly acclaimed move, Congress passed the “ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” on February 10, 2022. This legislation amends the Federal Arbitration Act (“FAA”) and invalidates pre-dispute arbitration agreements that preclude a party from filing a lawsuit in court involving sexual assault or sexual harassment, at the election of the party alleging such conduct. According to Senate Majority Leader Chick Schumer, the bill is “one of the most significant changes to employment law in years.” The new law will take effect immediately upon execution by President Biden and will apply to all arbitration agreements, including those already in place.
How Does This New Law Impact Employment Practices Around the Country?
The new act renders pre-dispute arbitration clauses and waivers unenforceable under federal, state, or tribal law. Arbitration still may be used; however, the person alleging the wrongdoing may choose to elect arbitration, or go the traditional route by filing suit in court. The new law does not apply to nondisclosure agreements (“NDAs”), but advocates hope that the law will be extended to cover NDAs as well.
In assessing the new law’s implications on specific employment situations, it is helpful to understand the definition of key terms. A pre-dispute arbitration agreement under the new law includes “any agreement to arbitrate a dispute that had not arisen at the time of the agreement.” Class action waivers are similar, and include clauses that prohibit, or waive one of the parties’ rights to a joint, class, or collective action concerning a sexual assault or harassment dispute that had not yet arisen at the time the agreement was made. Sexual assault is defined as any nonconsensual sexual act or sexual contact. Sexual harassment includes any of the following acts directed at an individual or a group:
- Unwelcome sexual advance
- Unwanted physical contact that is sexual in nature; including assault
- Unwanted sexual attention including unwanted sexual comments or propositions for sexual activity
- Conditioning professional, educational, consumer, health care, or long term care benefits on sexual activity; and
- Retaliation for rejecting unwanted sexual attention
The applicability of the new law to a particular agreement will be determined by a judge in a court of law rather than an arbitrator. Presumably, the new law applies to all pre-dispute arbitration agreements governed by the FAA, regardless of whether they are a mandatory condition of employment, or merely voluntary.
Employers should review and revise any arbitration agreement currently in place to ensure that its verbiage is in line with this new legislation as well as reflective of best practices in the industry. Employers also must prepare management for the reality that sexual harassment disputes will likely remain in court, openly litigated in a public forum before a jury that may be far less predictable than an arbitrator.
Now is also a good time to ensure that employers have implemented a written policy for the resolution of sexual harassment complaints in the workplace that includes a complaint procedure with alternative avenues or resources for a complaining employee, immediate remedial measures to separate the parties involved in any harassment complaint, prohibition on retaliation, prompt and effective investigation, and implementation of any remedial measures that may be warranted. For employers that lack an internal Human Resources (“HR”) representative, retaining a third-party HR consultant to investigate a sexual harassment complaint may be the best way to minimize liability and defend future claims in court, provided the employer follows the HR consultant’s recommendations.
Finally, employers should be requiring upon hire and at least bi-annually thereafter sexual harassment prevention training for all employees. Managers should be trained to detect and immediately report to HR or senior leadership all actual or suspected sexual harassment, and HR or senior leadership should be adept at following company policy in response to an actual or suspected complaint. All employees should be trained on the importance of maintaining a harassment-free workplace, the company’s harassment avoidance policy, and how to invoke the complaint procedure.
While arbitration of sexual assault or sexual harassment claims is still possible, most complainants (and their seasoned attorneys) are expected to prefer litigation in court. The result for employers is a more public, less predictable, potentially more costly outcome that is subject to the whim of jurors as well as the social and political environment of the day. The more employers do now to prevent and remediate sexual harassment in the workplace, the better off it will be if a later dispute arises.
The employment practice team at Wood, Smith, Henning and Berman is available to answer any and all questions you may have in this regard as well as assisting in properly revising any agreements currently in place. Please do not hesitate to contact a member of our team should you require assistance.