Congress Passes Bipartisan Legislation Amending the Federal Arbitration Act as it Relates to Sexual Harassment or Sexual Assault Claims

By McMahon Berger P.C.

February 22, 2022

In a showing of bipartisan unity, the United States Senate passed H.R. 4445 on a voice vote Thursday, February 10, 2022. Senate passage means the bill will be sent to President Joe Biden for signature into law, likely within the next few weeks.

H.R. 4445 will allow businesses to resolve allegations of workplace sexual harassment and assault. The bill also includes new ways to address these issues in employment contracts. Of primary significance the bill would amend the Federal Arbitration Act, 9 U.S.C.A. §§ 1 et seq. (“FAA” or “Act”) to ban agreements requiring arbitration of workplace sexual harassment or assault claims that were signed prior to such incident occurring.

The FAA is a 100-year-old law that was initially designed to be a cost-effective way for business entities to resolve both employment and other contract disputes. A series of Supreme Court decisions beginning in the 1990s expanded the scope of the FAA. According to a recent study done by the Economic Policy Institute, in 1992, just 2 percent of U.S. workers were subject to mandatory arbitration clauses, but by 2018, more than 56 percent of U.S. workers were subject to the Act, which accounted for roughly 60 million U.S. workers.

The overall role of the FAA is to govern arbitration issues in various areas of law, but H.R. 4445 amends the law only with respect to the arbitration of disputes involving sexual assault and sexual harassment in employment contracts. The language of the bill includes language making the non-enforcement of any arbitration requirement applicable to class and collective actions as well.

Public sentiment guided by social movements such as the #MeToo movement over the last few years has pressured Congress to review the impact mandatory arbitration played in preventing public disclosure of repeat harassment. Workers’ rights and other advocacy organizations highlighted to Congress how the out-of-court resolution of workplace disputes in some cases allows repeat offenders to escape public scrutiny. The attention prompted some Senate Republicans to break from their party’s steadfast support for employers on workplace matters, creating a rare chance at passage in the upper chamber.

Other high-profile advocates, such as former Fox News broadcast journalist Gretchen Carlson, advocated to Congress on both sides of the aisle to support their cause. Sen. Lindsey Graham (R. S.C.) was one of the first Republican Senators to support the bill. Sen. Graham made the case to the business community that mandatory arbitration clauses for sexual harassment and assault were bad for business. The Senator was quoted as saying: “When it comes to sexual assault and harassment, I believe these types of agreements have a chilling effect and should be banned.”

Even with the support of a well-respected Senator such as Lindsey Graham, Republican support for the bill initially was hard to come by and only through compromise did the bill gain enough support to pass through both chambers. The compromise allows arbitration in these situations to remain an option if the employee chooses.

Even before public sentiment helped passage of the amendment, companies such as Microsoft, Uber and Google had already stopped including such language in their employment contracts as early as 2017. Supporters of this bill have made it clear that they are looking to make further changes to the FAA, such as banning enforcement of pre-dispute arbitration agreements in any context, not just sexual harassment or assault.

Employers are advised to examine their existing employment and arbitration agreements to ensure compliance with the new law. Consulting with experienced employment counsel is strongly recommended and the attorneys at McMahon Berger are available to provide guidance on this issue.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.

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