Mandatory Arbitration Clauses for Workplace Sexual Harassment and Sexual Assault Claims Are No Longer Enforceable

In a rare bipartisan act, Congress passed the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” bill (the “#MeToo Bill”), which bars enforcement of mandatory arbitration agreements for workplace sexual harassment and sexual assault claims. After voicing support for the #MeToo Bill, President Biden signed it into law on March 3, 2022.

Background

The #MeToo movement exploded onto the scene in 2017, renewing discussions around sexual harassment in the workplace. Since that time, employee advocacy groups have lobbied for laws aimed at lifting the proverbial veil of confidentiality regarding the resolution of employee disputes, with mandatory arbitration of workplace sexual harassment and sexual assault claims drawing specific criticism. Some large companies, including Google, Microsoft, and Uber, even preemptively removed employee sexual harassment claims from their mandatory arbitration clauses.

With public opinion moving increasingly against employer requirements to arbitrate sexual assault and sexual harassment claims, both the Senate and the House of Representatives passed bills invalidating mandatory arbitration in this context, with the Senate, ultimately, passing the bill proposed by the House. In the simplest terms, the new legislation allows an employee to choose the forum where his or her workplace sexual harassment or sexual assault claims will be decided: a court or private arbitration.

Specifics

The #MeToo Bill nullifies existing pre-dispute mandatory arbitration provisions and restrictions on joint, collective, or class actions, to the extent that they apply to workplace sexual assault and sexual harassment claims.

These restrictions apply to every sexual assault or sexual harassment dispute arising under an employment relationship, whether filed under federal, state, or tribal law, and which arise or accrue after the #MeToo Bill’s enactment date. The definitions of “sexual assault dispute” and “sexual harassment dispute” defer to the definitions used in the applicable federal, state, or tribal laws.

The statute does not foreclose an employee’s opportunity to pursue his or her claims through the more confidential arbitration forum. Rather, employees may still elect to do so, but employers may no longer require them to do so. Additionally, employers who wish to dispute whether a particular claim falls under this legislation must litigate that matter in court rather than confidential arbitration.

Key Takeaways for Employers

Employers with pre-dispute mandatory arbitration or class action waiver requirements should understand that any mandatory applicability to sexual harassment or sexual assault claims will be void. Employers should address this issue during their periodic review of their arbitration agreements. Employers should consider revising their arbitration provisions to carve-out sexual harassment and sexual assault claims and provide a carve-out for any other claims that are legally prohibited from being subject to mandatory arbitration. The bottom line is sexual harassment and sexual assault claims will now be litigated in court. Whether this leads to an increase in such claims remains to be seen.

The Biden administration has signaled that the #MeToo Bill is not the only forthcoming legislation aimed at narrowing the applicability of mandatory arbitration. In a letter of support for the law, the administration noted that it intends to extend these restrictions on mandatory arbitration to include claims “regarding discrimination on the basis of race, wage theft, and unfair labor practices.” These additional measures however, will not enjoy the same bipartisan backing as the #MeToo Bill. Indeed, opponents of the #MeToo Bill have already voiced concerns regarding its expansion into other types of claims.

Tellingly, a bill introduced in the House of Representatives in February 2021 sought similar expansion, proposing to prohibit all pre-dispute arbitration clauses that require employees to pursue their employment, consumer, antitrust, or civil rights disputes in arbitration. But the bill has not gained much traction since its introduction, with groups like the United States Chamber of Commerce coming out strongly in opposition to its passage. Whether any future legislation is sweeping, or more modest in scope, employers should remain aware that more changes regarding mandatory arbitration or class action waivers may be coming.