Effects of the Federal Arbitration Act Amendments on a Former Employee’s Sexual Harassment Claims

Recent Amendment to the Federal Arbitration Act

On March 3, 2022, President Joe Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act) into law. The Act amends the Federal Arbitration Act (FAA) to give employees who are parties to arbitration agreements with their employers the option of bringing claims of sexual assault or sexual harassment either in arbitration or in federal court or in state court. If employees had agreed to arbitrate such disputes before the claims arose, those employees can now bring those claims directly to court.

Additionally, individuals or a named representative of those individuals may now bring sexual assault or sexual harassment claims via a class or collective action even if they had previously waived the right to proceed collectively before the claims arose.

A few states had enacted similar legislation, including California, New York, Virginia and Washington. However, Florida did not have similar legislation. As such, employers and employees in the State of Florida will be directly impacted by the signing of the Act. The Act does apply to arbitration agreements signed in the State of Florida and does apply to actions brought in state court.

It is important to note that the Act is effective immediately and applies to arbitration and class- and collective-action waiver agreements entered into before the Act’s effective date.

The Act amends the FAA to include a new section which states:

[A]t the election of the person alleging conduct constitution a sexual harassment dispute or a sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no pre-dispute arbitration agreement or pre-dispute joint action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.

What do Employers Need to Know

The Act gives employees the option to invalidate arbitration agreements. Such arbitration agreements are not automatically invalid and employees may still choose to abide by the terms of an existing agreement. However, employees now also have the choice to pursue these claims in court regardless of any mutual agreements with their employers.

The Act applies to all claims that arise or accrue after March 3, 2022. The Act does not affect claims that arose or accrued before March 3, 2022.

Valid arbitration agreements between employees and employers are not affected by the Act. The Act only applies to claims arising out of sexual assault and sexual harassment allegations. As employees have the ability to elect between arbitration and court under the Act, arbitration agreements are not per se invalid. Employers do not need to eliminate mandatory arbitration provisions from their agreements, however, going forward, employers should consider removing mandatory arbitration language solely for claims regarding sexual assault and sexual harassment. Additionally, employers do not need to go back and amend previously executed arbitration agreements. Said agreements remain valid, but sexual assault and sexual harassment claims will no longer be subject to the terms of the agreements.

There will be litigation that results from the passing of the Act. Employers should mindful of the added expenses that will arise by claims being litigated as opposed to going through arbitration. Employees are likely to argue that “cases” means that all claims, even claims unrelated to a sexual assault or sexual harassment, can be removed from arbitration as long as the claims have some relation to sexual assault or sexual harassment.

Employers should continue to monitor developments in this area as the Act may act as a template for further bills prohibiting pre-dispute arbitration agreements in other areas, such as discrimination and discriminatory harassment claims.

For more information about the existing arbitration agreement’s impact on an existing employee’s sexual assault and sexual harassment claims or questions about the particular circumstances involved in your case, contact McKellar Poursine, PLLC.