Employers who use arbitration agreements for employment disputes just had the scope of those agreements narrowed. On March 3, 2022, President Biden signed into law the Forced Arbitration of Sexual Assault and Sexual Harassment Act.
As the name of the Act implies, the new law prohibits employers from requiring that sexual harassment and sexual assault claims be arbitrated as part of a mandatory arbitration agreement of employment claims. The new law also overrides any terms of employment agreements that prohibit class actions for sexual harassment or sexual assault claims.
Finally, the law will have an immediate impact because it applies retroactively. This means that it invalidates any current arbitration agreement that an employee has signed to the extent that the claim is for sexual harassment or sexual assault. The only exception is for cases that are already pending or completed in arbitration.
Advocates of the law contend that private arbitration of such claims is bad public policy and allows companies to shield such claims from the public eye because the claims and results of such claims are not public. Employer advocates have long argued that arbitration is more efficient, faster, and more cost-effective than pursuing employment claims in court.
But Congress rejected the employer arguments as to these types of claims, voting in a bipartisan manner to create this exception to the general rule that mandatory arbitration agreements are permissible for employment disputes.
While this post’s focus is on employer obligations, it should be noted that the scope of the new law is not limited to the employment context. Any company that uses a mandatory arbitration agreement for consumers would also be subject to the terms of the new law. Consequently, all businesses that utilize mandatory arbitration agreements, including banks, credit agencies, leasing companies, and contractors, should review and update their agreements to comply with the law.
Employers with questions may contact me at email@example.com or by phone at 239-344-1287.