No More Mandatory Arbitration of Sexual Misconduct Claims Per New Federal Law
Whether in employment contracts, terms of service provisions, leases, or other agreements, American companies can no longer keep claims of sexual assault, harassment, and misconduct out of the courthouse and public eye through the use of mandatory arbitration provisions.
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the Act) is perhaps the most significant legislation to date to emerge from the #MeToo movement. It passed with rare and large bipartisan support in both houses of Congress, and President Biden is expected to sign the bill into law soon. The Act, which will be effective upon the president’s signature, gives individuals a choice between filing a civil lawsuit or going to arbitration to resolve allegations in cases related to sexual harassment or assault.
While the law's most notable impact will be on the 60 million American employees currently subject to mandatory arbitration provisions, it also applies to all other businesses and agreements. For example, ride-sharing companies can no longer force passengers to arbitrate claims of sexual assault that occur in their vehicles, and landlords cannot do the same for such acts that occur on their property.
Retroactive Effect: Existing Mandatory Arbitration Provisions for Sexual Misconduct No Longer Enforceable
The Act provides that "at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute..., no predispute arbitration agreement or predispute 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."
The Act defines "sexual assault dispute" as one "involving a nonconsensual sexual act or sexual contact" and "sexual harassment dispute" as one "relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law." A judge, rather than an arbitrator, will decide whether the Act applies to a given dispute and arbitration provision, regardless of whether the provision purports to delegate such determinations to an arbitrator.
Importantly, the prohibition on forced arbitration provisions involving sexual harassment and assault claims applies retroactively. This means that any existing agreements or clauses that purport to require arbitration of such claims will no longer be enforceable. Employers and other businesses that have relied upon these provisions can no longer do so. That said, the Act should not impact mandatory arbitration provisions that apply to other matters not involving sexual assault or harassment.
Following in Illinois’ Footsteps
This nationwide ban on mandatory arbitration of sexual misconduct claims comes in the wake of similar legislation passed in Illinois several years ago.
The Workplace Transparency Act, which became effective on January 1, 2020, prohibits unilateral mandatory arbitration provisions that purport to cover “unlawful employment practices,” which means any form of unlawful and actionable discrimination, harassment, or retaliation under Title VII, the Illinois Human Rights Act, or other applicable and relevant law.
This Illinois law is broader than the federal law insofar as it renders invalid mandatory arbitration provisions for any kind of harassment and discrimination claim, not just those involving sexual assault and harassment. But it is also narrower than its federal counterpart in that it only applies in the context of employment relationships. As with the federal law, employers can still include mandatory arbitration clauses in their contracts, but if they do so, the provision must expressly exclude harassment and discrimination claims.