Mandatory arbitration agreements have been the subject of a litany of litigation all over the country for quite some time. They can be a useful tool for limiting an employer’s liability, especially in class or collective wage and hour cases. Now, however, an arbitration agreement that mandates arbitration of sexual assault and sexual discrimination claims is no longer enforceable.
On February 7, 2022, the U.S. House of Representatives passed, and on February 10, 2022, the U.S. Senate approved, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which would amend the Federal Arbitration Act (FAA) to invalidate clauses in employment agreements that require employees to arbitrate claims of sexual assault or sexual harassment. President Biden signed the bill into law on March 3, 2022. Therefore, any existing arbitration agreements that include sexual harassment and sexual assault claims are no longer enforceable as to those claims.
Several states, such as New York and New Jersey, had already passed laws limiting the use of a mandatory arbitration provision to require employees to arbitrate these claims rather than litigate them in court. The laws had been challenged, however, with an argument that they were preempted by the FAA. This argument no longer has merit since the FAA has been amended to ban mandatory arbitration of these claims.
New York had already taken it a step further and banned mandatory arbitration agreements that include “any clause or provision in any contract which requires as a condition of the enforcement of the contract or obtaining remedies under the contract that the parties submit to mandatory arbitration to resolve any allegation or claim of discrimination, in violation of laws prohibiting discrimination, including but not limited to, article fifteen of the executive law.” NY CPLR 7515. Therefore, in New York, any mandatory arbitration agreement that includes claims of discrimination are unenforceable, as well.
This does not mean, however, that the employee cannot choose to arbitrate claims of sexual assault, harassment and discrimination. It’s the choice of the employee. As an employer, if you currently have a mandatory arbitration agreement in place which includes sexual assault and harassment (and discrimination in New York), and an employee asserts these claims but refuses to arbitrate them, you should not move to compel arbitration of these claims. You can, however, update your policies and agreements to state that sexual assault and harassment claims may be arbitrated, but are not required to be.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.