On March 3, 2022, President Biden signed the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (“HR 4445”) into law. HR 4445 significantly changes the Federal Arbitration Act (“FAA”) to allow individuals or named representatives in a class or collective action alleging a “sexual harassment dispute” or a “sexual assault dispute” to invalidate an existing pre-dispute arbitration agreement or joint-action waiver that would otherwise force such claims into arbitration. The full text of HR 4445 can be viewed here.
Specifically, HR 4445 amends the FAA as follows:
“… at the election of the person alleging conduct constituting 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 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.”
HR 4445 contains the following key definitions:
HR 4445 also requires civil courts, not arbitrators, to determine whether an arbitration agreement is valid or enforceable as to sexual harassment or sexual assault claims. Civil courts will make the determination even if the arbitration agreement is challenged, “specifically or in conjunction with other terms of the contract containing such agreement,” or if the arbitration agreement contains a clause that purports to delegate that determination to the arbitrator.
HR 4445 applies to any “dispute or claim that arises or accrues” on or after the date on which the legislation is enacted. The legislation does not apply retroactively to already pending claims for sexual harassment or sexual assault, and it does not affect parties already engaged in arbitration of these claims. Because the application of HR 4445 to an existing arbitration agreement will be determined only when a dispute or claim for sexual harassment or sexual assault arises, employers should evaluate their current arbitration agreements for compliance with HR 4445 and consult with their employment counsel to determine if HR 4445-related revisions are necessary.
Notably, HR 4445 allows parties to agree mutually to arbitrate any claims of sexual harassment or assault, so long as the parties voluntarily enter into a written agreement to arbitrate the dispute after the dispute has arisen. HR 4445 also does not preclude pre-dispute arbitration agreements, or class or collective action waivers of other claims, including claims of discrimination, retaliation, or wage-and-hour-related claims.
In addition to HR 4445, the status of mandatory pre-employment arbitration agreements in California remains in flux. For a more comprehensive update on the topic, see our legal update on Chamber of Commerce v. Bonta here.
In Bonta, a Ninth Circuit panel initially reinstated California Assembly Bill 51 (“AB 51”). AB 51 generally precludes employers from using mandatory arbitration agreements as a condition of employment and favors voluntary mutual agreements to arbitrate employment-related claims. Implementation of the panel’s decision in Bonta was delayed when the Chamber of Commerce filed a motion for review, and the Ninth Circuit recently stated that it will not conduct its review of Bonta until after the U.S. Supreme Court has reached its final decision in the related arbitration case of Viking River Cruises, Inc. v. Moriana, as that case could impact California arbitration law as well.
The takeaway for employers is that while the Bonta case remains in limbo, the injunction against the enforcement of AB 51 remains in effect. Though employers technically may continue to require applicants to sign mandatory arbitration agreements as a condition of employment pending a final decision about AB 51 in Bonta, those agreements may become unenforceable if the Ninth Circuit decides in favor of AB 51. Given the continued uncertainty of the enforcement of AB 51 and its retroactivity if implemented, we have cautioned employers to revise their arbitration agreements to include additional language regarding the voluntary and mutual nature of the agreement, and implement practices regarding execution of the agreements in compliance with AB 51.
Given the significance of the FAA changes resulting from HR 4445, employers should consult with their employment counsel about modifying their current arbitration agreements to align with HR 4445 (as well as AB 51).
For further information regarding arbitration issues, or assistance with drafting and implementing an updated and compliant arbitration agreement, contact the attorneys at LightGabler.>For further information regarding COVID-19 benefits or other employment law issues, contact the attorneys at LightGabler.