Many employers have adopted arbitration agreements to limit costly employment litigation, potential runaway juries, and workplace disputes that become tried in the court of public opinion. But employers should reconsider their legal strategy in light of a recent amendment to the Federal Arbitration Act (FAA) resulting from the #MeToo movement, the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.” This Act was passed by Congress and became effective on March 3, 2022, when it was signed by President Biden.
As employers who have adopted arbitration agreements are likely aware, many state legislatures have sought to limit the use of arbitration in workplace disputes, including Washington and California. Courts have sometimes found these state laws to be preempted by the FAA, so Congress’s passage of this amendment to the FAA could eliminate that potential roadblock.
This new federal law applies to arbitration clauses and joint, class or, collective action waivers in any agreement signed before an incident of workplace sexual harassment or assault. Unlike other laws that seek to prohibit the use of arbitration, this law allows the employee to choose whether to go straight to court to pursue sexual assault or sexual harassment claims, or alternatively, to pursue those claims in arbitration if the employee has agreed to arbitration. The law clearly states that this is the employee’s “election”:
[A]t the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
This means that the law applies retroactively to any existing agreements once the law is signed by President Biden. The law bans clauses that prohibit or waive the right of an employee to participate in a joint, class, or collective action, in any forum, concerning disputes regarding sexual harassment or assault. The law also requires that courts, and not arbitrators, resolve whether the new law applies, even if the agreement delegates this power to the arbitrator.
Importantly, the new federal law only gives employees the right to go to court with regard to claims for sexual assault or sexual harassment that arise on or after the date of the enactment. This means that employees cannot avoid valid arbitration agreements with regard to other workplace claims, such as unrelated claims for wrongful termination. And employers can avoid court and mandate arbitration to resolve any claims that arose before the law’s enactment date, including sexual assault and sexual harassment claims.
Lane Powell’s team of labor and employment attorneys is here to help you develop and implement the strategy that supports your business and your employees. For more information, contact Katheryn Bradley or Courtney McFate. Keep up-to-date by subscribing to Lane Powell’s Legal Updates.
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