According to the White House, over 60 million American workers are currently subject to mandatory arbitration provisions, which “silence[] victims of abuse by forcing them into a confidential dispute forum without the right to appeal.” As a result of H.R. 4445, also called the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, these employees will now have an option to sue their employers in court—at least for claims of sexual harassment and sexual assault. The new law amends the Federal Arbitration Act (FAA) to prohibit enforcement of contract provisions that mandate pre-dispute arbitration or waive the right to bring a joint, class or collective action in cases involving workplace sexual harassment and sexual assault disputes, including claims brought under state antidiscrimination laws. These changes invalidate any current pre-dispute agreement forcing an employee to arbitrate a case related to a sexual harassment or sexual assault dispute, except as to disputes that have already arisen or accrued prior to enactment of the new federal law.
Notably, the law includes an exception allowing arbitration of such cases if an employee elects to arbitrate a specific case after the alleged conduct has occurred. Additionally, the law only bars enforcement of pre-dispute arbitration “with respect to a case [that] relates to the sexual assault dispute or the sexual harassment dispute.” (Emphasis added.) However, there is still uncertainty as to whether this provision is intended to permit all claims in a “case” involving a claim of sexual harassment or sexual assault to bypass mandatory arbitration, or whether employees subject to a mandatory arbitration provision who pursue their sexual harassment or sexual assault claims in court may still be required to arbitrate any other claims they may have.
Employers should also be aware of state laws that purport to go further than the new federal law in limiting an employer’s ability to compel arbitration. New York, New Jersey and California have all recently passed laws that prohibit the use of mandatory pre-dispute arbitration for any employment-related discrimination, harassment or retaliation claim.1 Courts have generally been hostile to such laws, finding they are preempted by the FAA.2 But recently a federal appellate court ruled that California’s anti-arbitration law is enforceable.3 California AB 51 purportedly makes it unlawful for employers to require applicants or employees to waive any “right, forum, or procedure,” including the right to file a civil action for a violation of the California Fair Employment and Housing Act and/or the California Labor Code, as a condition of employment. Since AB 51 was signed into law in 2019, it has been the subject of legal challenges and was initially enjoined from taking effect. In September 2021, the Ninth Circuit overruled the lower court, temporarily lifting the preliminary injunction. In a closely watched opinion, the three-judge panel held that pursuant to the FAA, California courts must enforce signed arbitration agreements, but an employer could be found in violation of the law if an employee is terminated or denied a position for refusing to sign a pre-dispute arbitration agreement. The Ninth Circuit is currently deciding whether to rehear the case en banc. Until that time, enforcement of California AB 51 is paused.
As a result of this new federal anti-arbitration law, employers will need to revisit their current employment contracts and arbitration programs to ensure that any mandatory arbitration provision or class action waiver includes a carve-out for claims involving sexual harassment and sexual assault. WilmerHale attorneys are available to assist employers in complying with the new requirements.
