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Employees may soon avoid mandatory arbitration clauses in connection with any case claiming sexual assault or harassment.  Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, and President Biden is expected to quickly sign it into law.

Arbitration has long been a key factor in an employer’s ability to manage their risk and potential liability under the variety of federal, state, and local laws governing their personnel practices.  This Act deals a potential blow to employers’ ability to mandate arbitration in the context of sexual harassment claims.

The Act gives employees alleging sexual harassment the ability to elect to render a mandatory arbitration clause invalid or unenforceable.  Phrasing the choice as an “election” appears to mandate that the person resisting arbitration affirmatively challenge the arbitration agreement, rather than the arbitration agreement being entirely unenforceable. A “sexual harassment dispute” is defined as a dispute relating to any of the following conduct directed at an individual or group of individuals:

  • Unwelcomed sexual advances.
  • Unwanted physical contact that is sexual in nature, including assault.
  • Unwanted sexual attention, including unwanted sexual comments and propositions for sexual activity.
  • Conditioning professional, educational, consumer, health care, or long-term care benefits on sexual activity.
  • Retaliation for rejecting unwanted sexual attention.

The Act applies not only to federal claims under Title VII of the Civil Rights Act of 1964, but also to state and tribal law claims as well.  Employees can also avoid class, collective, or multi-plaintiff actions in connection with sexual harassment disputes.  The Act also provides that the validity and enforceability of an agreement is to be decided by the court, rather than an arbitrator, which might make it more likely that disputes will be resolved in favor of court litigation rather than arbitration.

Employees frequently bring a sexual harassment claim, also referred to as hostile work environment, as part of a broader action with other employment-based claims.  Although the Act does not explicitly address how mandatory arbitration would apply to such a mixed action, it provides that it reaches actions that “relate to” sexual harassment claims.  This broad language raises the prospect that employees alleging sexual harassment along with other, potentially unrelated claims will be able to litigate the entire dispute in court.

The new Act, once signed, will undoubtedly have far-reaching implications given the millions of employees subject to arbitration clauses.  Numerous recent Supreme Court decisions giving broad construction of the scope and applicability of the Federal Arbitration Act (“FAA”) may also be called into question.

Johnson & Bell will continue to monitor this development.  In the meantime, if you have questions about how the bill might impact your organization, please contact Genevieve M. LeFevour, Christopher J. Carlos or Caroline K. Vickrey.