Last month, Congress passed a major workplace reform through legislation entitled the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.” The bipartisan bill, also known as the #MeToo Bill, was sponsored by Sen. Kirsten Gillibrand (D-NY) and passed unanimously after the House previously passed it on a wide bipartisan basis. President Biden signed the legislation into law on March 3, 2022. The text of the bill can be found here.
Amendment of Federal Arbitration Act: Why and How
The new law amends the Federal Arbitration Act to ban so-called “forced arbitration” of disputes involving workplace sexual harassment or assault where an agreement to arbitrate existed prior to the acts that gave rise to the claim. These clauses are often found in employment agreements executed at the outset of employment.
Arbitration serves many purposes, and can be a beneficial process to resolve disputes quickly and less expensively than litigation. But critics say arbitration provisions function to keep misconduct allegations from becoming public by resolving legal disputes in private, through a process that is typically confidential and may result in a disparity in parties’ relative bargaining power not present in the court system.
To be clear, the new legislation doesn’t prohibit parties to a dispute from voluntarily choosing to proceed with arbitration as a way to resolve their claims, but its implications are significant. With the enactment of this legislation, agreements providing for mandatory arbitration of employee sexual harassment claims have been rendered unenforceable. The bill also nullifies agreements that waive an employee’s right to join a joint, class, or collective action in court, or through arbitration, or any other forum that relates to a dispute over sexual harassment or assault.
The #MeToo Bill applies retroactively to invalidate any existing agreement that mandates arbitration for sexual harassment or sexual assault disputes. The legislation defines those terms with a comprehensive set of definitions: any dispute involving conduct directed to an individual and involving “unwelcome sexual advances”; “unwanted physical conduct that is sexual in nature”; “unwanted sexual attention” (including comments or propositions for sexual activity); conditioning benefits on sexual activity; or retaliation for rejecting unwanted sexual attention are all considered subject. And under the new law, any disagreement over whether a dispute is subject to the law must be resolved in court, rather than by an arbitrator.
The legislation is seen as a strong protection for employees, allowing victims to pursue remedies in court — and before a jury of their peers — rather than behind the closed doors of an arbitrator’s office. It follows a groundswell of public support to address the handling of sexual misconduct claims. While some of the nation’s largest employers, including Facebook, Lyft, Microsoft, Uber and Wells Fargo (among others) have already ceased or banned the practice of forced arbitration in workplace sexual harassment and assault cases, an estimated sixty million employees in the United States are subject to arbitration clauses. Many of those clauses are now null and void.
Implications for Employers
In light of these legislative changes, employers should be aware that any arbitration agreement purporting to address workplace sexual assault or harassment claims may be unenforceable. The new law does not, however, apply to all arbitration agreements. The process is still permitted for discrimination claims — so long as they are not grounded in allegations of sexual harassment or assault as defined in the law — and many other types of workplace disputes. And, of course, voluntary arbitration is still permitted.
The clauses at issue are common in employment agreements. Going forward, employers should review their agreements for any arbitration language subject to these changes. While employers may still use their existing agreements, they should note any provision subject to the #MeToo Bill is likely unenforceable. Good practice should be to roll out newly-revised employment agreements to ensure full compliance with the law.
