Many employment contracts contain provisions mandating arbitration and/or prohibiting class action lawsuits.
These provisions may no longer be valid or enforceable for sexual assault and sexual harassment disputes under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”).
On March 3, 2022, President Biden signed the law, which Congress enacted with bipartisan support on February 10, 2022.
The Act amends the Federal Arbitration Act to provide that, at the election of a contracting employee, an employment contract’s provisions mandating arbitration, or prohibiting class action or similar proceedings, are invalid and unenforceable with respect to disputes over conduct alleged to be sexual assault or sexual harassment under federal, state, or tribal law.
The statute only applies to allegations that “had not yet arisen” when the contract is made.
This is consistent with most employment claims, which allege wrongful conduct during employment.
Therefore, if an employee contracts, or the employer amends the employee’s employment contract, to require arbitration after a potential claim has arisen, that claim will not be subject to the Act.
It is important to note that the Act does not automatically invalidate arbitration mandates or class action waivers for sexual assault or sexual harassment disputes.
If an employee does not elect to have the Act apply, an arbitration mandate and/or class action waiver will be unaffected by the Act.
The Act is retroactive in that it applies to existing and future employment contracts.
The Act will be applied under federal, not any state’s, law.
Further, a court, not an arbitrator, will determine whether the Act applies to a provision and, if so, its validity.
This is true whether or not the employee challenges the arbitration provision specifically or as a larger challenge to the employment contract.
The Act’s requirement that the court make these determinations is important because many employment contracts require such determinations to be made by an arbitrator, not a court.
It is also important because courts have held that a court can only address a specific challenge to an arbitration provision itself, while an arbitrator can resolve a challenge to an entire employment contract, including an arbitration provision.
If you have questions regarding the Act or its applicability to your or your company’s employment contracts, contact your FOS attorney.