On March 4, 2022, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, H.R. 4445, which allows victims of sexual assault or sexual harassment to litigate claims in court regardless of any arbitration agreement they may have signed. The House previously passed the Bill on February 7, 2022 with a 335 to 97 vote, showing overwhelming bi-partisan support for this new law.

Writing in support of the Bill, President Biden noted that “[m]ore than 60 million Americans are subject to mandatory arbitration clauses in the workplace, often without realizing it until they come forward to bring a claim against their employer.”[1] This indicates a large number of employers will be affected by this new law.

The new law applies only to claims that arise or accrue from March 4, 2022 going forward; it is not retroactive to claims that arose or accrued prior to the H.R. 4445 becoming law. The law is retroactive, however, to the extent it may render a forced arbitration agreement voidable for applicable claims that arise or accrue from March 4, 2022 on. Determining the applicability of H.R. 4445 is not an arbitrable issue and that determination must be made by a judge under federal law rather than an arbitrator.

Another important note is that H.R. 4445 is not limited to an employee-employer relationship; it applies more widely in other situations where there may be a forced arbitration agreement or clause for sexual harassment or assault claims, such as consumer services, ridesharing apps, etc.

Employers should reconsider use of arbitration agreements. The new law does not prohibit employers from using arbitration agreements for discrimination claims, including sex discrimination claims that do not involve sexual harassment or assault, but legal trends and public demand are increasingly pushing for more limited use of arbitration agreements.

From a public policy perspective, individuals asserting civil rights violations are typically given the opportunity to avail themselves of the judicial process to seek redress. Forced arbitration of employment discrimination claims denies employees this opportunity, which employees are increasingly pushing back on. One may also question whether forced arbitration of discrimination claims, like race discrimination or harassment, is equitable in light of this exemption for sexual harassment and assault claims.

Not only is there a growing trend pushing back on arbitration agreements, the benefits of forced arbitration may also not serve an employer’s best interest. Arbitration limits an employer’s defense and options. Arbitrators may be disinclined to dismiss a case without a full hearing even where a court would grant summary judgment. An arbitrator, who may not even be a lawyer or judge, plays the role of both judge and jury, but if the arbitrator makes a mistake or the decision is unfavorable, there is very rarely an ability to successfully appeal that mistake or decision. Unfavorable decisions may also result in counsel refusing to select an arbitrator in the future and potentially narrow down the pool of arbitrators to those with less experience or knowledge. Perhaps most surprising to many employers is that arbitration is not always cheaper or faster than a court proceeding.

Employers should speak to legal counsel about arbitration agreements and whether it makes business sense to continue using these clauses. At a minimum, employers should revise arbitration agreements going forward to carve out sexual harassment and assault claims.

Goodsill labor and employment attorneys are available to assist:

John S. Mackey, Esq.  [email protected]
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Notice:  We are providing this Goodsill Alert as a commentary on current legal issues, and it should not be considered legal advice, which depends on the facts of each specific situation. Receipt of the Goodsill Alert does not establish an attorney-client relationship.

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[1] See Statement of Administration Policy, H.R. 4445 – Ending Forced Administration of Sexual Assault and Sexual Harassment Act of 2021, February 1, 2022.