Congress passes bipartisan Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act

On February 10, 2022, the U.S. Senate passed S. 2342, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, with strong bipartisan support¹. If signed by President Biden, the Act will end the use of mandatory pre-dispute arbitration agreements and pre-dispute joint-action waivers in employment claims of sexual assault and sexual harassment².

The Act defines a pre-dispute agreement as “any agreement to arbitrate a dispute that has not yet arisen at the time of the making of the agreement,” and a pre-dispute joint-action waiver as “an agreement that prohibits a party from participating in a joint, class, or collective action in a judicial, arbitral, administrative, or other forum, regarding a dispute that has not yet arisen at the time of the making of the agreement.” Such agreements are also sometimes referred to as “forced arbitration clauses.”

While the Federal Arbitration Act (FAA) requires that valid pre-dispute arbitration agreements be enforced according to their terms, this new Act will amend the FAA to create an exception for pre-dispute agreements involving claims of sexual assault and sexual harassment. Under the Act, complainants asserting sexual assault or sexual harassment claims will now have the unilateral right to bring claims under the pre-dispute agreement or litigate their claim in court, and such agreements shall not be valid or enforceable with respect to these two claims. The Act also allows employees to bring such claims individually or on behalf of a class.

Notably, § 402(b) of the new Act gives courts — not arbitrators — full discretion to determine whether the Act applies to the validity and enforceability of “an agreement to arbitrate…,” even where the agreements expressly delegated questions of validity and enforceability to an arbitrator. Courts may determine the agreement’s validity under the Act, “irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such an agreement.” In other words, the Act gives courts discretion to retroactively review and invalidate all existing pre-dispute arbitration and joint waiver agreements as they pertain to sexual assault and sexual harassment disputes. This discretion exists even where a complainant is challenging “other terms of the contract containing such an agreement.” Courts will have to interpret what “in conjunction with” means in terms of whether the claims of sexual harassment or sexual assault dispute are central to a plaintiff’s complaints.

The Act pertains only to review and invalidation of pre-dispute agreements, meaning that employees and their employers can still agree to arbitrate a sexual assault or sexual harassment dispute after a claim or dispute arises, and that claims that do not include harassment or assault may still be subject to arbitration agreements.

If signed as expected, the Act will have broad implications for companies with mandatory arbitration agreements and class action waivers. The Act would take effect immediately (prospectively), “with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.”    

As a result of last-minute changes to S. 2342, a question remains as to whether employers can still compel retaliation claims to be arbitrated. The Act also does not address whether employers jury trial waivers are agreements outside of the Act’s purview. These issues will undoubtedly be the subject of future litigation. For now, employers should review their agreements to determine if revisions are needed with respect to claims for workplace harassment or sexual assault, so as to appropriately carve out “disputes that cannot be arbitrated or subjected to pre-dispute arbitration agreements” under federal law.