The Likely End of Mandatory Arbitration Agreements for Sexual Misconduct in the Workplace

4 min

On February 10, 2022, the U.S. Senate passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the Act), drastically limiting the scope of pre-dispute arbitration agreements and class/collective action waivers for sexual harassment and sexual assault disputes, and ushering in substantial protections for victims of workplace sexual misconduct. Consistent with his Statement of Administration Policy, President Biden is expected to sign the Act into law. While many states have already taken steps toward limiting or prohibiting the application of mandatory arbitration agreements for sexual harassment in the workplace, this is the first successful piece of federal legislation to address this topic specifically.

The Act's Coverage

The Act will amend the Federal Arbitration Act (FAA), which currently requires enforcement of arbitration agreements and class/collective action waivers by creating an important carveout for sexual assault and sexual harassment disputes. The Act defines "sexual assault dispute" broadly as a dispute involving nonconsensual sexual acts or sexual contact, as such terms are defined in 18 U.S.C. § 2246 or similar applicable tribal or state law, including when the victim lacks capacity to consent. Similarly, the Act broadly defines "sexual harassment dispute" to mean a dispute relating to conduct that is alleged to constitute sexual harassment under applicable federal, tribal, or state law.

Notable Provisions of the Act
  • The Complainant's Choice. The Act does not automatically render pre-dispute arbitration agreements or class/collective action waivers invalid and unenforceable. Instead, the Act permits any person or named representative of a class or collective action alleging a sexual harassment or sexual assault dispute under federal, tribal, or state law to elect to invalidate such agreements.
  • Application to All Future Claims. The Act applies to "any dispute or claim that arises or accrues" after the Act is enacted. This means that a Complainant could invalidate any pre-dispute arbitration agreement or class/collective action waiver even if it was executed prior to the enactment of the Act.
  • Voluntary Arbitrations. The Act permits parties to voluntarily agree to post-dispute arbitration agreements.
  • Jurisdiction of Courts. If a party challenges the enforceability of an arbitration agreement or class/collective action waiver under the Act, a court, rather than an arbitrator, will determine the validity and enforceability of the arbitration agreement under federal law, regardless of whether such agreement delegates that authority to an arbitrator. Similarly, if a dispute arises about whether a particular claim is a "sexual harassment dispute" or "sexual assault dispute," as defined under the Act, that question must be submitted to a court, rather than an arbitrator, regardless of the existence of a contrary contractual term.
The Effects of the Act

Historically, the national policy has been to generally favor arbitration, as it provides a less costly, faster, and more confidential forum for resolving disputes. However, because of its perceived inequities and complainants' desires to share their alleged experiences publicly, the elimination of mandatory pre-dispute arbitration provisions in employment contracts and employee handbooks has been a central focus of workplace and women's rights movements in recent years. This Act codifies the bipartisan support for allowing alleged victims of sexual misconduct a choice of being heard in court or going to arbitration. The employee, not the employer, has the power in deciding whether pre-arbitration provisions and class/collective action waivers should apply to the claim. This does not mean, however, that sexual assault disputes and sexual harassment disputes will never be subject to arbitration. Employees may opt to enforce the pre-arbitration agreement or class/collective action waivers, or they may decide to enter into post-dispute arbitration agreements. Also, pre-dispute arbitration agreements and class/collective action waivers can be enforced if the sexual harassment or sexual assault dispute is not brought under federal, tribal, or state laws, but rather under a local law, such as the New York City Human Rights Law. Employers can also still enforce arbitration agreements and class/collective action waivers for other common workplace or employment-related disputes, such as wage and hour claims, retaliation claims, and discrimination claims, including those based on sex, if the underlying allegation is not grounded in a sexual harassment or sexual assault dispute. However, employers should be mindful of how this Act may affect related claims or disputes. For example, if the complainant brings claims for a sexual harassment dispute and race discrimination under federal law together, a court may cite to judicial economy in refusing to bifurcate the issues, and allow both claims to proceed in court, rather than requiring the employee to pursue these claims separately.

Next Steps for Employers

The Act is a significant departure for employers that heavily rely on mandatory pre-dispute arbitration agreements and/or class/collective action waivers. Employers in states where such agreements are still permitted will need to revamp their approach to employment-related disputes and make necessary revisions to comply with the Act. Depending on applicable state laws, any changes employers make to these provisions should be clearly explained to their employees. In the interest of transparency, employers should also consider including this information in their annual sexual harassment training programs.

Employers should contact the authors of this article or any member of Venable's Labor and Employment Group with any questions that arise.