On February 10, 2022, the United States Senate passed Senate Bill 2342 through a voice vote. Titled the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021,” Senate Bill 2342 (the Bill) is expected to be signed by President Biden and will take effect immediately.
The Bill applies to all existing arbitration agreements, even those signed prior to the Bill's enactment. The Bill gives individuals who are alleging sexual assault or sexual harassment the right to void arbitration agreements that require such claims to be submitted to arbitration. The validity of the arbitration agreement with respect to these claims will be determined by federal law. In addition, only courts, not arbitrators, can apply this new law to arbitration agreements.
The Bill addresses “predispute arbitration agreements” and “predispute joint-action waivers.” A predispute arbitration agreement is defined under the law as “any agreement to arbitrate a dispute that has not yet arisen at the time of the making of the agreement.” A predispute joint-action waiver is defined as “an agreement, whether or not part of a predispute arbitration agreement, that would prohibit, or waive the right of, one of the parties to the agreement to participate in a joint, class, or collective action in a judicial, arbitral, administrative, or other forum, concerning a dispute that has not yet arisen at the time of the making of the agreement.”
The law defines a sexual assault dispute as any dispute “involving a nonconsensual sexual act.” A sexual harassment dispute is defined broadly as meaning “a dispute relating to any of the following conduct directed at an individual or a 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, healthcare, or long-term care benefits on sexual activity; and (e) retaliation for rejecting unwanted sexual attention.”
Anticipating this new law, employers should review their mandatory arbitration agreements and class action waivers for any needed revisions. Employers should also verify that any agreements potentially covered by this new law have provisions that will permit the agreements to continue to apply to claims beyond sexual assault and sexual harassment. If there is an argument that other aspects of the arbitration agreement may not survive this change in the law, the employer may have to make certain all existing employees sign new arbitration agreements. Finally, employers should review existing agreements to determine if any revisions should be made for agreements signed after the law is effective. Since new agreements may involve new consideration for the changes (i.e., something of value in exchange for the employee signing), employers are encouraged to consult an employment lawyer for further advice on this significant change in the law.
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