The Ending Forced Arbitration Act and Its Impact on Employers

Oftentimes, when a new hire signs an employment contract, they are agreeing to private arbitration in the event of any workplace-related issue. For employers, arbitration is favorable to going to a court because it saves time, money, and valuable resources that are required to try a case in court. However, critics of arbitration have been vocal about the fact that these forced arbitration agreements generally favor the employer, making it challenging for employees to get the justice they deserve.

On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act. Effective immediately after the signing, this law voids forced arbitration agreements that exist between employers and employees in the case of sexual assault or sexual harassment. What was a win for the MeToo Movement is something that HR departments around the country are examining, working to understand, and adapting to. In this article, we’ll break down some of the details of this new law from an HR perspective.

The Specifics

Most employers have existing arbitration agreements in place that take employee complaints to arbitration immediately instead of court. With arbitration, the outcome is generally legally-binding and cannot be overridden in other legal settings, but this law changes that when it comes to sexual assault and harassment.

Now, if an employee makes a sexual assault claim against a superior or a peer in the workplace, that employee is not bound by any of the decisions made via arbitration. If the employee is satisfied with the arbitration outcome, they can allow that to stand. However, if they decide they want to bring the complaint to court, the court then gets to make an independent decision about whether or not overriding the arbitration outcome is valid in each specific case. If it is, then legal proceedings will take place to determine the outcome of the case.

Important Considerations

There are many ways in which the Ending Forced Arbitration Act is changing how employers navigate legal proceedings that happen in their domain. With this act, a few notes to consider are:

• It was made effective on the date of signing for any cases brought forward as of or after that date. For older cases, arbitration outcomes will still stand.
• This legislation directly amends the Federal Arbitration Act which provides basic legal requirements in instances of private arbitration. It enforces the legally binding agreement made during arbitration, but now, with this amendment, sexual assault-related cases are exempt.
• The enforceability of this act will be up to the court, not the arbitrator.
• Employees may be incentivized to bundle other complaints with sexual assault allegations, leaving forced arbitration agreements in question. The court will need to provide insight as to how these bundled approaches should be handled; many legal experts expect that the sexual assault or harassment claims will be handled independently from any other claims that arise from the same employee.

Examine Your Arbitration Details

It may be time to take a look at the arbitration agreement within your company. Does it provide information about the new approach to sexual assault and harassment allegations? Keeping these documents as updated as possible will benefit all parties involved. While it is never preferential to have to work through sexual assault-related claims, handling them with care is the best practice moving forward.