New law that would prohibit forced arbitration of certain claims

By Jeff Jones
Special to the UCBJ

On March 3, 2022, President Biden signed into law the “End to Forced Arbitration of Sexual Assault and Sexual Harassment Act” (“EFASASHA”). The law is effective immediately and is actually retroactive so that even if an arbitration agreement was signed or incorporated in an employee policy prior to March 3, 2022, the law still prohibits the forced arbitration of a sexual assault or sexual harassment claim. 

Arbitration is an alternative to litigation as a means of resolving disputes. In recent years, mandatory arbitration agreements in the workplace have been heavily criticized particularly with respect to sexual harassment and similar claims, arguing that such agreements enable employers to settle such claims without the public scrutiny (and potential backlash) of litigation.          

However, many employers maintain mandatory arbitration provisions for their employees, contractors, and vendors, because it is often viewed as beneficial to both parties, more efficient, and generally faster and less expensive than a matter litigated in court.

In addition, the process has traditionally been considered just as fair as a matter in court because it is presented to a neutral arbitration hearing officer or panel of officers. The arbitrators are chosen by the parties, review and analyze the materials filed by both parties, and the case is then presented to the arbitrator or arbitration panel for a decision, which is referred to as the “award.”  The arbitration process is generally confidential, which means the materials submitted to the arbitrator or arbitration panel, the final decision or ‘award,’ the allegations of the complaining party, and the defenses to those claims, are not publicly available. The employer will usually raise the arbitration agreement as a defense to a legal action brought by the employee in court, seeking a stay or dismissal of the action and asking the court to compel arbitration.   

The EFASASHA provides that, at the election of the employee, in cases of sexual harassment  or sexual assault disputes (or the election of the named representative of a class or in a collective action alleging such conduct), no pre-dispute arbitration agreement or pre-dispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and related to the sexual assault dispute or the sexual harassment dispute. Thus, any existing mandatory arbitration clauses or contracts (or policies) are now voidable, even if the individual signed the mandatory arbitration agreement before EFASASHA officially became law. 

The EFASASHA also applies beyond employees – it includes clients, customers, patients, and consumers.  

What about claims other than sexual assault or sexual harassment? For now, claims that are subject to mandatory arbitration provisions other than sexual assault and/or sexual harassment are still subject to compulsory arbitration where a policy or contract requires it and of course, subject to other applicable laws. Several bills have been presented in Congress in recent years that prohibit mandatory arbitration policies in a broader context. For example, the Forced Arbitration Injustice Repeal Act (FAIR) and the Arbitration Fairness Act are two examples of legislation that would prohibit a pre-dispute arbitration agreement from being valid or enforceable if it requires arbitration of an employment dispute, consumer dispute, antitrust dispute, or civil rights dispute, which would essentially ban employers from requiring employees to resolve any legal disputes by way of private arbitration. In addition, several states, including California, Maryland, New Jersey, New York, Vermont, and Washington, already have laws that ban mandatory arbitration clauses in employment contracts in certain cases. 

While the new law does not require employers to remove or amend existing arbitration provisions in employee handbook policies, or other similar documents, employers should be aware that an individual alleging sexual assault or sexual harassment may choose between utilizing the arbitration process or taking the usual steps along the path to litigation.

Of course, the best way to prevent sexual harassment and/or assault claims from becoming protracted litigated cases is to prevent them from occurring in the first place. Employers should have a strong, effective policy prohibiting harassment in the workplace that is consistently enforced. The policy should provide several avenues for reporting alleged harassment. Finally, an essential element to an effective harassment policy is to conduct employee training on a regular basis for all employees, managers, and supervisors.    

Jeffrey G. Jones is a regional managing member for Wimberly Lawson Wright Daves & Jones PLLC. He can be reached at jjones@wimberlylawson.com.

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