The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 was signed into law by President Biden on March 3, 2022.
On February 10, 2022, the US Senate passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”). The Act already passed the US House, and it is expected President Joe Biden will sign it into law. In brief, the Act will amend the Federal Arbitration Act (FAA) to allow a plaintiff who alleges a sexual harassment or sexual assault claim to invalidate a predispute arbitration agreement.
The FAA provides that an agreement to arbitrate disputes “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” It is well-established that the FAA preempts state laws that impose additional restrictions on the enforceability of arbitration agreements.
Nevertheless, many states, including California and New York, have passed legislation seeking to prohibit the application of arbitration agreements when a plaintiff alleges certain #MeToo claims (i.e., sexual harassment or sexual assault claims). Courts have overturned these laws—citing the FAA’s well-established preemptive effect over conflicting state arbitration laws. By amending the FAA, the Act (a) establishes the categories of non-arbitral claims under the FAA and (b) eliminates the state preemption issue so long as state laws are consistent with the amendment.
Plaintiffs Alleging #MeToo Claims Can Chose to Invalidate Pre-Dispute Arbitration Agreements
In general, the Act permits a party who alleges “conduct constituting a sexual harassment dispute or sexual assault dispute” to invalidate a “predispute arbitration agreement.” Specifically, this includes (a) conduct that would constitute sexual harassment under federal, tribal, or state law (a “Sexual Harassment Dispute”) or (b) nonconsensual sexual acts or sexual contact (a “Sexual Assault Dispute”). A “predispute arbitration agreement” means any agreement to arbitrate a dispute that has not yet arisen at the time of the making of the agreement. The Act does not include other disputes, including allegations of discrimination or retaliation that do not also involve a Sexual Harassment Dispute or Sexual Assault Dispute.
Similarly, when a party alleges a Sexual Harassment Dispute or a Sexual Assault Dispute, under the Act the responding party cannot enforce a “predispute joint-action waiver,” which is an agreement that would prohibit or waive the right of any party to participate in a joint, class, or collective action in a judicial, arbitral, administrative, or other forum, concerning a dispute that has not yet arisen at the time of the making of the agreement. This restriction on joint-action waivers applies if the waiver is included in a predispute or postdispute arbitration agreement.
Further, the Act provides that a court, rather than an arbitrator, will determine whether the arbitration agreement is valid and enforceable under the Act. Thus, the court will not be bound the language of the arbitration agreements themselves on this issue, including delegation clauses. The court also must apply federal law to this determination, so conflicting state laws will be superseded.
Finally, the Act will apply to any dispute that arises or accrues after the date of enactment. Thus, it could impact the enforceability of preexisting arbitration agreements.
What This Means to You
The Act’s aim is to allow employees to bring sexual assault and sexual harassment claims in a public forum. In addition, it also may have a much broader effect because it is not limited to the employment context. The bottom line — anyone who utilizes arbitration agreements should review them to determine whether they comply with the Act.
We have substantial experience litigating FAA, state and other arbitrability issues. If you are interested in discussing these issues, or have any questions about this blog, please feel free to contact us.