A new law signed by President Biden brings significant changes to employers’ ability to require arbitration of certain disputes with employees and could lead to an increase in sexual assault and sexual harassment claims against employers in court.  On March 3, 2022, President Biden signed into law the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (the “Act”).  The Act amends the Federal Arbitration Act (“FAA”) to provide that predispute arbitration agreements and predispute joint-action waivers relating to sexual assault and sexual harassment disputes are unenforceable at the election of the person or class representative alleging the conduct.  The Act took effect immediately upon signing.

 Key Provisions of the Act

The new Act restricts enforcement of predispute arbitration agreements and predispute joint-action waivers over “sexual assault disputes” and “sexual harassment disputes.”  A “sexual assault dispute” is defined as a “dispute involving a nonconsensual sexual act or sexual contact… including when the victim lacks capacity to consent.”  A “sexual harassment dispute” is a “dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”  The Act does not expressly cover  retaliation claims.  If parties disagree as to whether the new law covers a particular dispute, the law provides that the determination is one for a federal court and not an arbitrator,  regardless of whether an arbitration agreement delegates such determination to an arbitrator.

The law also broadly defines predispute arbitration agreement as “any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement,” which presumably includes any employment agreement and separation agreement with an agreement to arbitrate.  A predispute joint-action waiver is an agreement “that would prohibit, or waive the right of one of the parties… to participate in a joint, class, or collective action in a judicial, arbitral, administrative, or other forum, concerning a dispute that has not yet arisen at the time of making the agreement.”

The Act only applies to claims that “arise or accrue” on or after the date of the law’s enactment (March 3, 2022), and likely covers predispute arbitration agreements or joint-action waivers that were entered into before the law’s enactment.  However, the new law does not retroactively apply to claims that arose prior to March 3, 2022.

Notably, the new law specifies that a covered arbitration agreement or joint-action waiver is unenforceable at the election of the person or class representative bringing the sexual assault or harassment claim.  Thus, employees subject to one of these agreements may still choose to arbitrate such claims.

The new law is the latest in a series of efforts by state and federal legislators to curb the enforceability of predispute arbitration provisions in the context of employment claims.  Over the last few years, many states have attempted to curb the enforceability of predispute arbitration agreements through state legislation, but many of those state laws faced preemption challenges under the FAA.  In 2018, the Senate approved an amendment to the Department of Defense appropriations bill, the Franken Amendment, that withholds federal funds from certain federal contractors who require employers or independent contractors to resolve any claim under Title VII of the Civil Rights Act of 1964 or any tort “arising out of sexual assault of harassment” through arbitration.

 Implications for Employers

Employers should review any existing predispute arbitration agreements to determine whether revisions may be needed in light of the new law.  This could include adding carve-outs for sexual assault or harassment claims or language that expressly provides the employee’s right to elect to bring sexual assault or sexual harassment disputes in court or arbitration, or making other updates to ensure that the agreement can be enforced as to other types of claims (unless a state law provides otherwise).  Additionally, the passage of the Act underscores the need for employers to focus on prevention and correction of sexual harassment in the workplace, before claims arise, including by reviewing and updating anti-harassment policies and procedures.

Finally, employers should note that the new Act could be just the first of many restrictions on arbitration in the coming years, in light of President Biden’s campaign promise to “ban employers from requiring their employees to agree to mandatory individual arbitration.”  Therefore, employers should continue to monitor closely any new legislation impacting predispute arbitration agreements to understand the possible impact on existing and future agreements.

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Photo of Lindsay Burke Lindsay Burke

Lindsay Burke co-chairs the firm’s Employment Practice Group and regularly advises U.S., international, and multinational employers on employee management and culture issues and international HR compliance. She is a key member of the firm’s Institutional Culture and Social Responsibility practice, working together with…

Lindsay Burke co-chairs the firm’s Employment Practice Group and regularly advises U.S., international, and multinational employers on employee management and culture issues and international HR compliance. She is a key member of the firm’s Institutional Culture and Social Responsibility practice, working together with white collar colleagues to conduct culture assessments, internal investigations of executive misconduct, and civil rights and racial equity audits and assessments. Lindsay has been at the forefront of the changing workplace issues impacting employers in the U.S. in the last decade, including #MeToo, Covid-19, and the renewed focus on diversity, equity, and inclusion. She frequently advises employers in relation to their processes and procedures for investigating complaints of discrimination, harassment, and retaliation and trains executive teams and board members on culture risk and the lawful implementation of DEI programs.

Lindsay also guides employers through the process of hiring and terminating employees and managing their performance, including the drafting and review of employment agreements, restrictive covenant agreements, separation agreements, performance plans, and key employee policies and handbooks. She provides practical advice against the backdrop of the web of state and federal employment laws, such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Equal Pay Act, the Family and Medical Leave Act, the Fair Labor Standards Act, and the False Claims Act, with the objective of minimizing the risk of employee litigation. When litigation looms, Lindsay relies on her experience as an employment litigator to offer employers strategic advice and assistance in responding to demand letters and agency charges.

Lindsay works frequently with the firm’s privacy, employee benefits and executive compensation, corporate, government contracts, and cybersecurity practice groups to ensure that all potential employment issues are addressed in matters handled by these groups. She also regularly provides U.S. employment law training, support, and assistance to start-ups, non-profits, and foreign parent companies opening affiliates in the U.S.

Photo of Carolyn Rashby Carolyn Rashby

Carolyn Rashby provides business-focused advice and counsel to companies navigating the constantly evolving and overlapping maze of federal, state, and local employment requirements. Carolyn’s approach is preventive, while recognizing the need to set clients up for the best possible defense should disputes arise.…

Carolyn Rashby provides business-focused advice and counsel to companies navigating the constantly evolving and overlapping maze of federal, state, and local employment requirements. Carolyn’s approach is preventive, while recognizing the need to set clients up for the best possible defense should disputes arise.

As a senior member of Covington’s Institutional Culture and Social Responsibility Practice Group, Carolyn has co-led significant investigations into workplace culture, DEI issues, and reports of sexual misconduct and workplace harassment.

As an employment lawyer with over two decades of experience, Carolyn focuses on a wide range of compliance and regulatory matters for employers, including:

  • Conducting audits regarding employee classification and pay equity
  • Advising on employment issues arising in corporate transactions
  • Strategic counseling on a wide range of issues including discrimination and harassment, wages and hours, worker classification, workplace accommodations and leave management, performance management and termination decisions, workplace violence, employment agreements, trade secrets, restrictive covenants, employee handbooks, and personnel policies
  • Drafting employment contracts and offer letters, separation agreements, NDAs, and other employment agreements
  • Advising on employee privacy matters, including under the California Consumer Privacy Act
  • Providing guidance on use of AI in the workplace and development of related policies
  • Leading anti-harassment and other workplace-related trainings, for employees, executives, and boards

Carolyn also works frequently with the firm’s white collar, privacy, employee benefits and executive compensation, corporate, government contracts, and cybersecurity practice groups to ensure that all potential employment issues are addressed in matters handled by these groups.

Photo of Amanda Michalski Amanda Michalski

Amanda Michalski is a member of the firm’s Employment Practice Group and counsels clients in a wide range of labor and employment issues. She advises clients on matters involving discrimination, harassment, retaliation, family and medical leave, remote work, and other workplace issues. She…

Amanda Michalski is a member of the firm’s Employment Practice Group and counsels clients in a wide range of labor and employment issues. She advises clients on matters involving discrimination, harassment, retaliation, family and medical leave, remote work, and other workplace issues. She frequently drafts and reviews employee policies, employee handbooks, offer letters, and separation agreements. She also assists clients in responding to demand letters and EEOC charges.

Amanda is a member of the firm’s Institutional Culture and Social Responsibility practice, where she works with white collar colleagues to conduct workplace investigations into allegations of workplace misconduct and civil rights and racial equity audits and assessments.

Photo of Zachary Agudelo Zachary Agudelo

Zach Agudelo is an associate in the firm’s Washington, DC office and is a member of the firm’s Employment, Employee Benefits and Executive Compensation, and Institutional Culture and Social Responsibility Practice Groups. He routinely advises clients on a range of labor, employment, and…

Zach Agudelo is an associate in the firm’s Washington, DC office and is a member of the firm’s Employment, Employee Benefits and Executive Compensation, and Institutional Culture and Social Responsibility Practice Groups. He routinely advises clients on a range of labor, employment, and employee benefits related issues, including wage and hour compliance, job classifications, restrictive covenants, workplace policies, incentive plans, and executive compensation. His practice also includes employment- and employee benefits-related diligence and advise in corporate transactions.

In addition, Zach assists both private and non-profit clients with matters involving harassment, discrimination, retaliation, and other issues arising under state and federal employment laws, including Title VII of the Civil Rights Act of 1964, the Equal Pay Act, and the Fair Labor Standards Act. He also has extensive experience conducting civil rights and racial equity assessments for corporations and advises clients on the lawful design of diversity, equity, and inclusion practices.