Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021

The right for employers to compel arbitration of employee claims was restricted under the Federal Arbitration Act (“FAA”) when President Biden signed into law the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (the “Act”). The Act prohibits employers from unilaterally enforcing pre-dispute arbitration agreements and class action waivers when an employee is bringing a sexual harassment or sexual assault claim against the employer.

Effectively, the Act removes sexual harassment and sexual assault claims from mandatory employment arbitration. If an employee alleges sexual harassment or sexual assault, any pre-dispute arbitration agreement is void as to those claims. The Act does permit the employee and employer to voluntarily choose to arbitrate any dispute after the claim arises, but it requires the consent of both the employee and the employer. In addition, if there is a dispute as to whether a claim brought by an employee is covered by the Act, that dispute must be heard by a court applying federal law. An employer is not entitled to have an arbitrator rule on whether the employee’s claim is covered by the Act.

Employers’ Next Steps

Restricting arbitration agreements is nothing new for California based employers. The California legislature has repeatedly attempted to limit an employer’s right to compel arbitration. The Act reflects a new direction from the FAA, which California businesses have long relied on to stave off the state’s efforts to limit arbitration agreements. Employers should consider modifying their existing arbitration agreements to include carve outs that would expressly state employees are permitted to voluntarily consent to arbitrate claims of sexual harassment and sexual assault.

This is another reminder that the best defense against sexual harassment and sexual assault claims is to be proactive about implementing policies and procedures that are designed to prevent these incidents from happening in the first place. Employers should provide regular training and education to employees. Employers should also ensure there are clear and safe lines of communication to management for employees that have experienced threats of or actual incidents of sexual harassment or sexual assault in the workplace. These types of incidents are serious and should be addressed swiftly and thoroughly. Developing policies ahead of time is critical to responding to incidents that arise.