Employers nationwide will no longer be able to require employees to arbitrate sexual assault or sexual harassment claims, regardless of whether they have otherwise enforceable arbitration agreements, pursuant to a new law passed by the U.S. Congress on February 10, 2022.  President Biden is expected to sign the law (H.R. 4445), entitled the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” which was passed with broad bipartisan support in the United States House and Senate.

The Details:

The new law will apply to any arbitration agreement entered into before a dispute has arisen and any agreement that waives a party’s right to participate in a joint, class, or collective action concerning a dispute that has not yet arisen.

The law concerns the enforceability of such arbitration agreements and collective action waivers in the context of disputes related to sexual assault or sexual harassment.  The new law defines “sexual assault dispute” as “a dispute involving a nonconsensual sexual act or sexual contact” and “sexual harassment dispute” as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”

Effectively, the new law says that any arbitration agreement or collective action waiver signed before a claim or dispute involving sexual assault or sexual harassment arises is voidable at the option of the individual with the claim.  In plain English, if an employer and employee sign an arbitration agreement or collective action waiver, and the employee later wants to make a claim against the employer for sexual assault or harassment, the employee can choose to pursue the dispute in arbitration or the employee can choose to sue in court under state or federal law.

Importantly, this law will apply to any dispute or claim that arises or accrues on or after the enactment date of the law.  Thus, the law may be invoked to invalidate arbitration agreements or collective action waivers that were signed before the new law comes into effect, but it should not be used to avoid arbitration of disputes that are already pending in an arbitral forum. 

The law further provides that the validity or enforceability of an arbitration agreement or collective action waiver will be determined by a court rather than an arbitrator, despite the existence of a contractual term to the contrary.  Thus, when an employee chooses to file a sexual assault or sexual harassment claim in court, the court, rather than an arbitrator, will decide whether the court is the proper forum for the claims. The new law applies only to “a case which is filed under Federal, Tribal, or State law and relates to the sexual assault and sexual harassment claims.” This should mean that otherwise valid arbitration agreements remain valid and enforceable with respect to other types of claims. However, we do anticipate litigation over the scope of the new law, including the treatment of other claims that may be included in a case with sexual assault or sexual harassment claims.

What does this mean for California employers?

Employers who currently enter into arbitration agreements or collective action waivers with employees or applicants should seek legal advice concerning whether and how to revise their agreements to provide a carve-out for employees with respect to sexual harassment or sexual assault claims.     

Also, given the publicity this new law has received, employers with arbitration agreements should anticipate more sexual assault and sexual harassment claims being filed in court, rather than arbitration.  This also appears like it could be the first salvo of future legislative efforts to broaden the scope of the law to add other types of harassment and discrimination employment claims to the list of claims that may not be subject to pre-dispute arbitration agreements. 

Finally, employers should note that this new law does not invalidate or affect otherwise enforceable arbitration agreements with respect to any claims other than those for sexual assault or sexual harassment.

Court to Defer Consideration of Law Barring Mandatory Arbitration of Employment Disputes

In related news, on February 14, 2022, the Ninth Circuit Court of Appeals announced it will defer consideration of a petition for rehearing in the case Chamber of Commerce of the United States v. Bonta, which presents a challenge to California AB 51, a law that would prohibit employers from requiring employees or applicants to agree to mandatory arbitration of disputes concerning the Fair Employment and Housing Act or the Labor Code.  The Ninth Circuit will wait until the U.S. Supreme Court issues a decision in Viking River Cruises, Inc. v. Moriana, which presents a challenge to California’s ban on arbitration agreements that waive employees’  right to bring representative actions under the Private Attorney General Act (PAGA).  Although the cases appear to present different issues, the Ninth Circuit may anticipate that the Supreme Court will issue a more broadly-applicable decision regarding the appropriate scope of arbitration in the Viking River Cruises case.  The Supreme Court will hear arguments in the Viking River Cruises case on March 30, but a decision is not expected before this summer. You can review WTK’s Special Alert regarding the Chamber of Commerce case here; and the Alert regarding Viking River Cruises here.)

If you have questions about the new federal law or the arbitration-related cases currently pending in federal courts and how they may affect you or your business, please contact:

Lonny M. Zilberman (lzilberman@wilsonturnerkosmo.com)

Katherine M. McCray (kmccray@wilsonturnerkosmo.com)

Emily J. Fox (efox@wilsonturnerkosmo.com)

Wilson Turner Kosmo’s Special Alerts are intended to update our valued clients on significant developments in the law as they occur. This should not be considered legal advice.