Forced Arbitration Ban in #MeToo Cases: What Does It Mean for Employers?

By Meaghan E. Murphy - Skoler, Abbott & Presser, P.C.

March 15, 2022

Inspired by the #MeToo Movement, Congress recently passed a bill aimed at preventing employers from requiring arbitration of sexual assault and sexual harassment claims. A few weeks later, President Biden signed the bill into law. The law, which is known as the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, took effect upon the President’s signature. This new law will impact many employers around the country, including those in Massachusetts, that use mandatory arbitration clauses or agreements to resolve sexual assault and sexual harassment claims with employees.

What Is Mandatory Arbitration?

Many employers include arbitration agreements in Employment Agreements with their new employees, or in Separation Agreements with departing employees. These agreements often include class action waivers, such that employees can only pursue claims against their employer on their own, and cannot pursue claims on behalf of any other person. When an agreement contains a mandatory arbitration clause, the parties to that agreement agree to have the disputes between them heard by a neutral third party—called an arbitrator—and to be bound by the terms of the arbitrator’s decision. Essentially, the arbitrator acts as the judge and jury, and their decision is a final and binding judgment. By agreeing to arbitration, the parties forego their right to pursue their claims in court in front of a judge or jury.

Mandating arbitration of employee claims is a common practice used to ensure confidentiality of the proceedings because there is no public record. Arbitration is also generally viewed as a more efficient and cost-effective way to resolve disputes. Generally, mandatory arbitration agreements are permissible and enforceable in court. The new law, however, creates an exception to that general principle.

How Does The New Law Change Things?

For the last few years, #MeToo activists have maintained that mandatory arbitration agreements silence victims and prevent them from publicly airing their experiences. Under the new law, employers will no longer be able to require arbitration of sexual assault or sexual harassment claims. Specifically, the new law bars the enforcement of most mandatory arbitration provisions in cases alleging sexual assault or sexual harassment, as well as claims of retaliation resulting from internal complaints of sexual assault or harassment. The new law will apply to all pre-dispute arbitration clauses, including those in contracts executed before the new law’s effective date, and will apply to any case under tribal, state or federal law relating to sexual assault and sexual harassment claims. Only mandatory arbitration is banned; employees may request or otherwise voluntarily agree to arbitrate a claim.

The new law also invalidates pre-dispute agreements that waive an employee’s right to participate in a class action in court, arbitration or any other forum that relates to a sexual assault or sexual harassment dispute. In other words, in cases where more than one employee is alleging sexual assault or sexual harassment claims, those employees may be able to pursue their claims as a group when appropriate; employers cannot require that each employee bring their own claims individually.

Although the Changes Are Significant, They Are Narrow

To be clear, any arbitration agreements and class action waivers that relate to claims other than sexual assault and sexual harassment—such as wage and hour, discrimination that does not involve sexual assault or harassment, and other contractual disputes—remain valid and can be enforced. The new law does not affect the validity of those types of mandatory arbitration agreements as to other claims. In addition, the new law does not affect claims that are already in the midst of arbitration proceedings. Those claims stay where they are.

Notably, the new law does not prohibit employers from requiring that employees waive their right to a jury trial. That means sexual assault and sexual harassment claims, whether brought individually or collectively, may be required to be decided by a judge. In many cases, a “bench trial” before a judge is more favorable to employers than a jury trial. Accordingly, employers can continue to require jury trial waivers of all claims, including sexual assault and sexual harassment claims.

Employer Takeaways

Employers should review their agreements with employees and revise them to comply with the new law’s restrictions. To that end, employers should carve out sexual assault and sexual harassment claims from any mandatory arbitration and class action waiver provisions and address them separately as appropriate. If employers opt not to make any revisions to their agreements, they should still communicate to employees that sexual assault and sexual harassment claims are not required to be arbitrated or pursued individually (as opposed to collectively). In addition, employers with arbitration agreements should anticipate more sexual assault and sexual harassment claims to be filed in court (instead of pursued in arbitration).

This is also a good opportunity for employers to review their anti-harassment initiatives more broadly, including written policies, investigation procedures, and anti-harassment training. If comprehensive preventative policies and procedures are in place, employers are in a better position to prevent sexual assault and harassment situations from arising in the first place.

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