President Biden is expected to sign into law landmark #MeToo legislation, which allows a plaintiff to elect not to arbitrate covered disputes of sexual assault or sexual harassment. The “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” amends the Federal Arbitration Act (FAA), by narrowing its scope and applicability. The bill’s passage had bipartisan support in both the House and the Senate.

Historically, some employers have implemented arbitration programs that require both the employer and its employees to arbitrate most or all types of employment claims, including claims alleging sexual harassment or sexual assault. Largely in response to the #MeToo movement, which began in late 2017, some states passed laws designed to prohibit or restrict employers from requiring employees to arbitrate sexual harassment or sexual assault claims. For example, in New York, employers are prohibited from requiring the arbitration of sexual harassment claims except where inconsistent with federal law. New York’s prohibition on mandatory arbitration in relation to sexual harassment claims went into effect on July 11, 2018, and it has applied to contracts entered into on or after that date. New Jersey and California have enacted similar laws. New Jersey’s law prohibits any provision of an arbitration agreement that waives a substantive or procedural right or remedy relating to employment discrimination, harassment, and retaliation claims. This law applies to all contracts and agreements entered into, renewed, modified, or amended on or after March 18, 2019. Further, on October 10, 2019, California enacted a law, which prohibits employers from requiring employees to sign new mandatory arbitration agreements concerning disputes arising under the California Fair Employment and Housing Act (FEHA) or California Labor Code.  California’s law applies only to agreements dated January 1, 2020 or after. However, courts have found these statutes to be pre-empted by the FAA.

On February 7, 2022, the U.S. House of Representatives overwhelmingly passed H.R. 4445, 335 to 97. Shortly thereafter, on February 10, 2022, the bill passed the Senate in an unrecorded voice vote.

As noted above, the finalized bill applies to both “sexual assault disputes” and “sexual harassment disputes.” A “sexual assault dispute” refers to “a dispute involving a nonconsensual sexual act or sexual contact, as such terms are defined in section 2246 of title 18 or similar applicable Tribal or State law, including when the victim lacks capacity to consent.” A “sexual harassment dispute” means a “dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”

Interestingly, the Senate passed the House version of the bill. Earlier versions of the Senate bill expanded the types of claims that fell under the definition of “sexual harassment disputes.” Under these earlier versions, “sexual harassment dispute” encompassed a “dispute relating to any of the following conduct directed at an individual or group of individuals: (A) Unwelcome sexual advances; (B) Unwanted physical contact that is sexual in nature, including assault; (C) Unwanted sexual attention, including unwanted sexual comments and propositions for sexual activity; (D) Conditioning professional, educational, consumer, health care, or long-term care benefits on sexual activity; and (E) Retaliation for rejecting unwanted sexual attention.” The finalized bill appears to narrow the claims that fall under the rubric of “sexual harassment disputes.”

Effective Date?

The Bill states that it applies to “any dispute or claim that arises or accrues on or after the date of enactment of this Act.”

What Does This Mean for Employers?

The passage of this bill now means that employees who have entered into arbitration agreements with their employers will in the future have the option of pursuing sexual harassment or sexual assault claims in court if the dispute or claim arose on or after the the date of enactment. Some employees may choose to continue to bring these claims through arbitration, given the privacy afforded by the arbitration process.

Employers should work with counsel to update their policies, and ensure that employment documents referencing arbitration of these claims reflect this new legislation. Faced with the inability to have all sexual harassment or sexual assault claims decided in arbitration, employers may wish to carve such claims out of arbitration policies altogether. This would allow for a discussion between the employer and employee on a case-by-case basis about whether they wish to mutually agree to arbitration, rather than leave the determination solely in the hands of the employee.

It is unclear if there is a bipartisan political appetite for prohibiting mandatory arbitration of other types of employment claims, such as those alleging sex discrimination, discrimination or harassment on the basis of race and ethnicity or wage claims. In a Statement of Administration Policy issued by the Executive Office of the President, on February 1, 2022, the Administration stated that it “looks forward to working with the Congress on broader legislation that addresses these issues as well as other forced arbitration matters, including arbitration of claims regarding discrimination on the basis of race, wage theft, and unfair labor practices.” At least one Senator, Joni Ernst, explained that while the this bill received bipartisan support as it relates to sexual harassment and sexual assault claims in the workplace, a future bill, expanding the scope to all employment matters, might not receive the same support.

Finally, in the future, employers may look to sever arbitrable claims if an employee elects not to arbitrate sexual harassment or sexual assault allegations that are otherwise joined with those claims. Courts have traditionally severed arbitrable claims from non-arbitrable claims under the FAA in other circumstances but plaintiffs may look for ways to argue against such severance under the Act.

If you have any questions about this legislation or for help drafting your company’s arbitration agreements, please contact your Baker McKenzie employment lawyer.