There will soon be a new federal law to address sexual assault and harassment lawsuits in the wake of the #MeToo movement. On February 10th, 2022, the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” (“Act”) was passed by the Senate, and is on its way to President Biden for his expected signature. The Act will allow victims of alleged sexual assault and harassment to invalidate some arbitration agreements and bring lawsuits in court. The effect of the Act will be to move litigation of sexual assault and harassment claims into courts and out of arbitrations; thus, making courts the only venue option for these types of claims.
The Act applies to both individual plaintiff and class action cases, “under Federal, Tribal, or State law” when two criteria are met: First, the Act applies to individuals covered by a “pre-dispute” arbitration agreement. This is defined as an agreement to “arbitrate a dispute that has not yet arisen at the time of the making of the agreement.”
Second, the Act applies to cases in which an individual or class representative claims that they were subjected to sexual assault or sexual harassment. The result of the Act is that the person alleging sexual assault or harassment will be able to invalidate an arbitration agreement that applies to his or her claim.
In addition, the Act makes a key change to the procedure for determining whether an arbitration agreement is enforceable in a particular case. Lawsuits and disputes often involve one party who wants to enforce an arbitration agreement while the other party resists enforcement. These disputes are decided either by the arbitrator or a court depending on where the claim was initially filed. However, under the Act, only a court—not an arbitrator—will determine whether the arbitration agreement is enforceable.
Passage of the Act raises significant and unanswered questions.
- How will courts proceed with litigation that includes a mix of sexual assault and harassment claims and unrelated claims such as unpaid wages or breach of contract? Will the courts split these cases into two and allow the parties to arbitrate everything but the sexual assault and harassment claims? Or will the courts require that all claims be tried in court?
- Will the Act be applied retroactively to all arbitration agreements currently executed between parties, or only arbitration agreements executed after the Act goes into effect?
- Will the Act impact the U.S. Supreme Court’s interpretation of the applicability of the Federal Arbitration Act (“FAA”) to employment law disputes?
- How will the Act interact with similar state laws or in states where the courts have held that the FAA is not preempted by the state’s arbitration act? For example, the law California passed after #MeToo, AB 51, does not apply to agreements that are enforceable under the FAA. The Act is not part of the FAA and could conflict with state laws addressing #MeToo issues.
It is anticipated that parties will challenge the Act on the issues raised above. However, there is little indication that such challenges will be successful. Employers should use this time as an opportunity to review their employment and arbitration agreements and make revisions consistent with the new Act.
Finally, the Act represents a narrow rebuke to the U.S. Supreme Court’s decision in Epic Systems v. Lewis. In that case, the Court held that employers could require that employees resolve disputes through individual arbitration. In her dissent, Justice Ginsberg called on Congress “correct[] what she saw was an “elevation of the FAA over workers’ rights to act in concert.” The Act does just that for claims involving sexual assault and harassment. Thus, while employers can require that employees sign agreements that mandate individual arbitrations, employees can invalidate these agreements as to sexual assault or harassment claims.