New Federal Law Ends Forced Arbitration of Sexual Assault or Harassment Claims

The new law also allows victims to pursue their claims as or on behalf of a class (i.e., a class action), despite the fact that many mandatory arbitration agreements commonly require individuals to pursue all claims on an individual basis only.

President signs a popular bill

President Joe Biden approved the groundbreaking Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 on March 3, and it took immediate effect. At the signing, Pres. Biden noted that “[b]etween half and three quarters of all women [plus some men] report that they have faced some form of sexual harassment in the workplace.” He also said that 60 million U.S. employees are subject to forced arbitration clauses, sometimes without their knowledge.

Public opinion is a factor

The evolution of this law began in the #MeToo movement, an advocacy and support organization established in 2006 and dedicated to those who survive sexual misconduct and violence, especially in the workplace. Public awareness of serial inappropriate and offensive behavior by powerful men toward the women who reported to them or were dependent on them for success and promotion exploded.

One reason this behavior seemed to have gone on in secret, often involving repeat offenders, was because of the fine print in employment contracts. Arbitration clauses required legal claims arising out of the employment relationship to be resolved by private and confidential arbitration, not in court.

The new law is one response to collective outrage at arbitration provisions. The process the law creates is straightforward:

1. The law applies if the dispute (about sexual assault or sexual harassment) arose or accrued on or after March 3, 2022. The date the parties signed any arbitration agreement if irrelevant, as long as the dispute arose after March 3, 2022.
2. If the new law applies to the dispute and an arbitration provision applies, the person alleging sexual misconduct has the power to elect whether to proceed with arbitration (the individual may prefer a private, confidential forum) or proceed in a court of law (where the allegations will be made public).
3. If the parties disagree about whether the new law applies to a dispute, a court must decide the issue under federal law, not an arbitrator (even if the applicable arbitration agreement states that an arbitrator decides various threshold issues).

Key takeaways

Kentucky employers are encouraged to inform their workforces about the new law and take the opportunity to reiterate their anti-harassment policies, confirm their zero tolerance for such inappropriate conduct, and remind employees of their obligation to report any such offensive behavior.

Employers should also consult with legal counsel about the impact of the new law on existing mandatory arbitration agreements and the new law’s interaction with state law. An experienced employment attorney can review existing contracts and recommend helpful modifications that both comply with the law and protect the employer as much as possible.