By David M. Cuppage, Esq.
On February 10, the United States Senate, by voice vote, passed joined the House of Representatives to pass the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (the Act). The Act, which President Biden is expected to sign, bans forced arbitration in cases involving sexual misconduct and allows victims the option of bringing up the dispute in federal, tribal, or state court.
Expect Far-Reaching Implications in the Field of Employment Litigation.
The Act amends the Federal Arbitration Act (the “FAA”), Title 9 of the United States Code, with respect to the arbitration of disputes involving sexual assault and sexual harassment. A sexual assault dispute is broadly defined as a dispute involving a nonconsensual sexual act or sexual contact, including when the victim lacks capacity to consent. Likewise, a sexual harassment dispute is broadly defined as a dispute relating to conduct that is alleged to constitute sexual harassment under applicable federal, tribal, or state law.
In general, the Act states that, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no pre-dispute arbitration agreement or pre-dispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under federal, tribal, or state law and relates to the sexual assault dispute or the sexual harassment dispute.
Of course, pre-dispute arbitration agreements are frequently found in employment agreements and such arbitration agreements typically require arbitration of employment-based claims involving quid pro quo sexual harassment, hostile work environment based on sex, and retaliation claims based on reporting sexual harassment and participating in investigations of sexual harassment. Those types of employment-based claims would now fall within the Acts prohibition of forced arbitration of sexual assault and sexual harassment claims in the workplace.
The determination of whether the Act applies with respect to a dispute shall be determined under Federal law by a federal or state court, rather than an arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement, and irrespective of whether the agreement purports to delegate such determinations to an arbitrator. Further, under the FAA, states are prohibited from passing or enforcing laws which are inconsistent with the FAA.
What Can/Should You Do Next?
This bill, once signed (an important distinction, because a week later, and this legislation is still awaiting President Biden’s signature), is going to impact Employers of all kinds immediately. Not only will they need to immediately take action to update any arbitration clauses in their existing and future employment agreements to make exceptions for sexual assault and sexual harassment, but they also need to be prepared for changes in venue for any pending matters scheduled for Arbitration that will no longer be binding under the specifications of this law. Current employee plaintiff’s in these cases need to consult with legal counsel about filing an immediate legal challenge – in court – to invalidate any current Arbitration proceedings and move the case to court.
Employers should also consult with legal counsel as soon as possible to evaluate and implement early case assessment strategies, particularly employers with volume cases, so that any pending matters related to sexual assault or harassment claims can be quickly triaged for pre-trial settlement negotiations. Lastly, employers should consult with legal counsel to assess their risk tolerance as it relates to any continued employment of managers or executives charged in these cases. The spectacle of a courtroom trial broadcasting the lurid details of sexual assault or sexual harassment in your workplace is not likely to play well with a jury, and less well with your other employers (especially if you’ve otherwise been able to maintain some discretion in your handling of the matter). The Court of Public Opinion is rarely behind an employer when these cases are tried in public courts. Even in cases where the claims lack substantiation or merit and pose little threat of victory, the public relations impact can be swift and costly. If you are a victim of sexual assault or harassment in the workplace, your prospects for justice and compensation for your trauma just got exponentially better.
