New Law Bans Forced Arbitration for Sexual Harassment Claims

A new federal law is likely to change the way many workplace sexual harassment claims are handled. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (H.R. 4445) took effect on March 3, 2022. It prohibits employers from forcing employees to agree to mandatory arbitration of any claims of sexual assault or harassment in the workplace.

What is Arbitration?

Many employers require employees to sign arbitration agreements as a condition of employment. Often, these are presented as just another part of the onboarding process, along with filling out payroll documentation and acknowledging receipt of a company handbook. By signing these agreements, however, employees agree to use arbitration for any disputes or claims they may have against an employer, giving up their rights to pursue other legal claims.

Arbitration is an out-of-court dispute resolution process that uses a private individual (or arbitration service employee) to decide the merits of a complaint. It is less formal, cheaper, and faster than filing a lawsuit or complaint with a government agency (like the EEOC). However, it has significant drawbacks for employees.

Arbitration limits the type and amount of damages that a claimant can recover, even if the employee proves significant damage or harm. Requiring claimants to arbitrate grievances also prevents them from joining similar claims together in class action lawsuits against their company or its representatives. Many mandatory arbitration clauses also include non-disclosure and confidentiality requirements, which prohibit employees from discussing their claims (or the terms of any settlements) with their coworkers or outside parties (like the media).

Why Prohibit Mandatory Arbitration for Sexual Assault and Harassment Claims?

For many victims of workplace sexual assault or harassment, mandatory arbitration clauses dramatically limit their rights to any compensation or recovery. These clauses often prevent the recovery of compensation for non-economic losses like pain and suffering, which can make up a substantial part of a sexual harassment claim. Limits on economic damages can restrict awards to very minimal amounts, even in cases where an individual has suffered significant damage to their career or earning potential. An arbitrator also generally lacks the authority to order equitable relief, like requiring a company to reinstate a worker to their former position or take disciplinary action against a harasser.

The confidentiality provisions contained in mandatory arbitration agreements may also protect repeat offenders, allowing them to continue patterns of abuse and harassment in the workplace without consequence. Lawsuits and agency investigations can expose bad actors and the companies that protect them to greater public scrutiny, which can help incentivize companies to take disciplinary action and make changes to workplace culture.

Claimants May Still Choose Arbitration to Resolve Workplace Harassment Claims

The new law does allow a victim of workplace sexual harassment or assault to choose arbitration rather than litigation for harassment claims. Arbitration can provide many benefits to both employers and claimants, including lower costs, quicker resolution of claims, and more privacy. COVID-19 has had a significant impact on the judicial system, causing long delays for civil litigation. Resolving a lawsuit can take many months (or even years); choosing arbitration can allow claimants to have their claims heard and resolved much more quickly by a neutral arbitrator or panel of arbitrators.

What Happens to Existing Mandatory Arbitration Agreements?

The new law invalidates all existing forced arbitration clauses for claims that relate to workplace sexual harassment or sexual assault. It applies to all claims that arise or accrue on or after the date the legislation took effect. Unfortunately, workers who have cases related to events occurring before that date will still be subject to mandatory arbitration if such a policy was in effect at the time.

It is important to note that the new law bars companies from requiring employees to use arbitration for cases only when related to sexual assault or sexual harassment in the workplace. Other claims against employers, including claims for wage theft, whistleblower retaliation, other harassment or discrimination claims based on race or nationality, etc., would still be subject to applicable mandatory arbitration clauses.

If you have been sexually harassed or sexually assaulted at work, contact an experienced employment law and workers’ rights attorney to discuss your options.