Following a rare showing of bipartisan support, yesterday
President Biden signed into law a landmark bill making it easier
for individuals to pursue workplace sexual harassment claims in
court and striking a blow to arbitration of the same.
According to the White House, over 60 million American workers
are currently subject to mandatory arbitration provisions, which
&ldldquo;silence[] victims of abuse by forcing them into a
confidential dispute forum without the right to appeal." As a
result of H.R. 4445, also called the Ending Forced Arbitration of Sexual Assault and
Sexual Harassment Act, these employees will now have an option
to sue their employers in court—at least for claims of sexual
harassment and sexual assault. The new law amends the Federal
Arbitration Act (FAA) to prohibit enforcement of contract
provisions that mandate pre-dispute arbitration or waive the right
to bring a joint, class or collective action in cases involving
workplace sexual harassment and sexual assault disputes, including
claims brought under state antidiscrimination laws. These changes
invalidate any current pre-dispute agreement forcing an employee to
arbitrate a case related to a sexual harassment or sexual assault
dispute, except as to disputes that have already arisen or accrued
prior to enactment of the new federal law.
Notably, the law includes an exception allowing arbitration of
such cases if an employee elects to arbitrate a specific case after
the alleged conduct has occurred. Additionally, the law only bars
enforcement of pre-dispute arbitration "with respect to a
case [that] relates to the sexual assault dispute or the
sexual harassment dispute." (Emphasis added.) However, there
is still uncertainty as to whether this provision is intended to
permit all claims in a "case" involving a claim
of sexual harassment or sexual assault to bypass mandatory
arbitration, or whether employees subject to a mandatory
arbitration provision who pursue their sexual harassment or sexual
assault claims in court may still be required to arbitrate any
other claims they may have.
Employers should also be aware of state laws that purport to go
further than the new federal law in limiting an employer's
ability to compel arbitration. New York, New Jersey and California
have all recently passed laws that prohibit the use of mandatory
pre-dispute arbitration for any employment-related
discrimination, harassment or retaliation claim.1 Courts
have generally been hostile to such laws, finding they are
preempted by the FAA.2 But recently a federal appellate
court ruled that California's anti-arbitration law is
enforceable.3 California AB 51 purportedly makes it
unlawful for employers to require applicants or employees to waive
any "right, forum, or procedure," including the right to
file a civil action for a violation of the California Fair
Employment and Housing Act and/or the California Labor Code, as a
condition of employment. Since AB 51 was signed into law in 2019,
it has been the subject of legal challenges and was initially
enjoined from taking effect. In September 2021, the Ninth Circuit
overruled the lower court, temporarily lifting the preliminary
injunction. In a closely watched opinion, the three-judge panel
held that pursuant to the FAA, California courts must enforce
signed arbitration agreements, but an employer could be
found in violation of the law if an employee is terminated or
denied a position for refusing to sign a pre-dispute arbitration
agreement. The Ninth Circuit is currently deciding whether to
rehear the case en banc. Until that time, enforcement of California
AB 51 is paused.
As a result of this new federal anti-arbitration law, employers
will need to revisit their current employment contracts and
arbitration programs to ensure that any mandatory arbitration
provision or class action waiver includes a carve-out for claims
involving sexual harassment and sexual assault. WilmerHale
attorneys are available to assist employers in complying with the
new requirements.
Footnotes
1. N.Y. C.P.L.R. § 7515; N.J. Stat. § 10:5-12.7; Cal. Labor Code § 432.6.
2. E.g., Latif v. Morgan Stanley & Co. LLC, No. 18CV11528 (DLC), 2019 WL 2610985, at *1 (S.D.N.Y. June 26, 2019); New Jersey Civ. Just. Inst. v. Grewal, No. CV 19-17518, 2021 WL 1138144, at *7 (D.N.J. Mar. 25, 2021).
3. Chamber of Com. of U.S. v. Bonta, 13 F.4th 766, 776 (9th Cir. 2021).
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