It’s official: Employers can no longer require employees alleging sexual misconduct to resolve their claims via arbitration.
Last week, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.
The new law amends the Federal Arbitration Act, which generally favors arbitration of employment-related disputes.
But there is now an important carve-out.
Now, employers cannot force employees to arbitrate what the law calls a “sexual assault dispute” or a “sexual harassment dispute.”
That means employers can no longer include mandatory arbitration provisions relating to these situations in employment contracts.
And it’s not just new contracts going forward. Instead, the new law also renders existing agreements to arbitrate such disputes null and void.
For good measure, it also specifically mentions that such agreements cannot ban class actions when these allegations arise.
Another big plus for employees in the law: It will be up to courts — and not arbitrators — to decide whether the new law applies to a particular agreement.
Under the law, employees can still voluntarily choose to submit their disputes to arbitration. But arbitration generally favors employers.
As a rule, it is faster and cheaper for them. Also, employers sometimes develop relationships with arbitrators as repeat players in the process. And arbitration generally makes it easier for employers to avoid the bad press that can easily arise in these instances.
Equal Employment Opportunity Commission Chair Charlotte E. Burrows praised the passage of the new legislation.
“I am delighted that the [bill] has become law,” Burrows said in a release. “For too long, enforcement of pre-dispute mandatory arbitration agreements has served as a potential barrier to justice for individuals who have suffered assault or harassment at work.”
The Takeaway for Employers
Run-of-the-mill mandatory arbitration clauses in employment contracts often say that any and all disputes will go to arbitration.
Now, the days of using that language are gone.
Employers who wish to incorporate mandatory arbitration provisions into new employment contracts should use language acknowledging that the provisions do not (as they now cannot) apply to disputes involving alleged sexual misconduct.
One final point that is well worth repeating: Even existing arbitration agreements are invalid to the extent that they purport to require employees to arbitrate sexual misconduct disputes.