New law ends forced arbitration of sexual harassment claims

A new federal law prohibits employers from forcing employees to arbitrate sexual harassment claims. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act invalidates pre-dispute agreements that force employees to resolve claims of sexual harassment through arbitration instead of litigation. Approximately 60 million American workers are bound by forced arbitration clauses in their employment agreements. However, as of March 3, 2022, those with claims of sexual harassment can have their day in court.

The Act, which passed with broad bipartisan support, amends the Federal Arbitration Act to make pre-dispute arbitration agreements for sexual harassment disputes invalid and unenforceable. A pre-dispute arbitration agreement is any agreement to arbitrate a dispute that had not yet arisen at the time the agreement was made. This definition is broad enough to include most employment agreements that require arbitration. A sexual harassment dispute is a dispute relating to conduct that is alleged to constitute sexual harassment under applicable federal, tribal or state law.

The Act also invalidates pre-dispute joint-action waivers. These are agreements that prohibit one party (the employee) from participating in a joint, class or collective action involving a dispute that has not yet arisen at the time the agreement is made. Employees are no longer bound by these pre-dispute joint-action waivers, regardless of whether the waiver is part of the pre-dispute arbitration agreement.

Disagreements regarding the Act’s applicability to a specific claim are resolved by a court, not an arbitrator. As a result, many employers will ultimately end up where they least wanted to be. However, it’s important to note that the Act applies to pre-dispute arbitration agreements. It does not prohibit the parties from mutually agreeing to arbitration after a claim has arisen. The Act also applies at the election of the person making the claim, so employees are free to proceed pursuant to their employer’s pre-dispute arbitration agreement if they wish.

Employers must understand that the Act applies to disputes or claims that arise or accrue on or after March 3, 2022. It applies to all pre-dispute arbitration agreements, even those that predate the new law. Given the popularity of pre-dispute arbitration agreements, many employers will need to review their employment contracts and consult with counsel to determine how the new law will affect them going forward. Employers also need employment practices liability insurance (EPLI) to protect against the uncertainty that accompanies the enactment of any new law.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance & Risk.

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