On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. It amends the Federal Arbitration Act (“FAA”) by banning mandatory arbitration in sexual assault and sexual harassment cases and allowing individuals alleging such conduct to bring their dispute in a federal, tribal or state court.
The law also bans mandatory arbitration of claims of retaliation that result from internal complaints of sexual assault or harassment. Individuals alleging sexual assault, sexual harassment, or retaliation stemming from such complaints do have the option of participating in arbitration on a voluntary basis. The new law does not apply to sex discrimination claims that are unrelated to sexual assault or harassment.
With the signing of the law, any mandatory arbitration clauses pertaining to sexual assault or sexual harassment are void and are no longer enforceable.
Some states, including New York, have previously passed laws banning or limiting mandatory arbitration of sexual harassment claims. The state laws have generally been met with challenges of preemption by the FAA. The preemption arguments will now be moot.
Employers who want to continue to use mandatory arbitration agreements will need to carve out any claims pertaining to sexual assault and sexual harassment in any future agreements. Notably, disputes previously settled through mandatory arbitration will remain closed and will not be impacted by this law. Employers should review their current arbitration agreements or arbitration clauses included in employment agreements prior to continuing to enforce same.