Business Solutions

Compelled Arbitration in Employment Claims

New Federal Law Limits the Use of Compelled Arbitration in Some Employment Claims

Mar 9, 2022
3 min read

Employee Handbooks: Your Employee Agreement

On February 10, 2022, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 with bipartisan support. President Biden signed the bill into law on March 3, 2022.

Effective immediately, the law adds a new Chapter to the Federal Arbitration Act (FAA) and renders unenforceable:

  • Arbitration agreements with respect to a case relating to a sexual assault or sexual harassment dispute.
  • Joint-action waivers prohibiting or waiving the right to participate in a joint, class, or collective judicial, administrative, or arbitral proceeding relating to a sexual assault or sexual harassment dispute.

Chapter 4 defines:

  • A “sexual assault dispute” as one “involving a nonconsensual sexual act or sexual contact” as those terms are defined in 18 U.S.C. § 2246 or similar applicable tribal or state law, including when the victim lacks capacity to consent.
  • A “sexual harassment dispute” as one “relating to conduct that is alleged to be sexual harassment” under federal, state, or tribal law.

The new Chapter’s application must be determined:

  • Under federal law.
  • By a court, not an arbitrator, regardless of whether:
    • the objecting party challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing the arbitration agreement; or
    • any provision in the agreement purports to delegate arbitrability to an arbitrator.

The new law applies to any dispute or claim arising on or after the date of enactment.

The law does not:

  • Restrict the enforceability of an agreement to arbitrate other employment-related claims, including:
  • Sex discrimination claims; or
  • Harassment claims based on other protected classes, such as race or religion.
  • Prohibit or restrict an agreement to arbitrate sexual harassment or sexual assault disputes after the claims arise.
  • Apply retroactively to preclude arbitration of claims that arose pre-enactment, but may be applied to arbitration agreements entered into before the law’s enactment regarding claims arising or accruing post-enactment.

Employers Should Review their Existing Arbitration Agreements

Employers should review their existing arbitration agreements in light of the new law and consider it when weighing the benefits and drawbacks of mandatory arbitration provisions in their Employment Agreements or Handbooks. Further, more changes to what claims are arbitrable and what are not could be forthcoming.

Contact the Business Employee SOLUTIONS Firm

Should you have further questions regarding your rights and obligations as an employer, please contact one of our BHMK attorneys to help you avoid costly employee lawsuits.

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