Effective immediately, employer-employee arbitration agreements common in business may no longer compel employees to arbitrate disputes concerning allegations of sexual assault or sexual harassment. This is the result of the enactment of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFA”), H.R. 4445. The EFA amends the Federal Arbitration Act to say that:
…at the election of the person alleging conduct constituting a sexual harassment dispute or 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.
The Ending Forced Arbitration Act and Class Actions
Notably, the EFA voids the class or collective action waivers common in arbitration clauses. Many arbitration clauses not only require the employees who sign them to waive their rights to go to court in employment disputes, but also limit arbitration to single employee claims, not class actions. This removes a major advantage for employers.
The law also provides that the determination of whether a dispute is covered by the EFA is made by a judge, not by an arbitrator.
Ending Forced Arbitration Act is Retroactive
Employers should be aware that the law is not only effective immediately, it is retroactive. That is, even if an employee signed an arbitration agreement years ago, any sexual assault or harassment claim he or she has goes to court. However, ongoing arbitrations of sexual assault/harassment claims that have already accrued are not affected, and arbitration cases already completed cannot be reopened.
One foreseeable effect of the EFA is that it will create tactical dilemmas for employers in situations where employees who have signed arbitration agreements allege both sexual harassment and other claims. Will the employer choose to bifurcate the case, letting the other claims go to arbitration while the sexual harassment claim goes to court, or will it make more sense to have the entire matter heard by a judge (and, of course, a jury)?
Finally, the Act is not limited to employment cases. It is potentially applicable to other situations involving clients, customers, or consumers where allegations of sexual harassment or sexual assault have been raised. Many consumer services contracts have arbitration clauses (think rideshare apps). To the extent disputes arise between the parties and involve sexual assault or harassment allegations, the EFA would appear to void those arbitration clauses as well.