H.R. 4445 Is Now Law and the Scope of Arbitration Has Narrowed

Mandatory arbitration of sexual assault or sexual harassment claims is a thing of the past. Last month, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (H.R. 4445) was signed by President Joe Biden. With that, the Federal Arbitration Act was amended to allow victims of alleged sexual assault or sexual harassment—including the representative of a class or collective action—to pursue their federal, state or tribal law claims in court even if they had previously entered into an arbitration agreement or joint-action waiver.

The Net Effect of H.R. 4445

The enactment of H.R. 4445 primarily impacts employers and employees to the extent mandatory arbitration agreements are most often at issue in the workplace setting. Nonetheless, the law is certainly not limited to the employer/employee relationship and can potentially affect customers, patients and consumers as well.

Still, employers and employees are in the crosshairs of H.R. 4445 first and foremost and the net effect of the law on these parties is clear. Simply stated, employers nationwide can no longer rely on predispute agreements that require employees to arbitrate claims—or that preclude them from bringing class actions—alleging incidents of sexual assault or sexual harassment that arise or accrue on or after March 3, 2022, the effective date of the new amendment to the FAA. Significantly, the law applies to all arbitration agreements, including those executed prior to March 3.

Notwithstanding the above, cases stemming from sexual assault or sexual harassment alleged to have occurred before March 3 can still be arbitrated. Likewise, waivers of class actions for these particular pre-March 3 claims remain enforceable. In addition, the FAA as amended does not have any effect on arbitration agreements where the dispute at issue is not based upon sexual assault or sexual harassment.

Sexual Assault or Sexual Harassment Claims Can Still Be Arbitrated

H.R. 4445 reads, in part, as follows:

“. . . at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.”

This provision means that the arbitration of sexual assault or sexual harassment cases is not prohibited. Rather, the law (1) serves to forbid parties, employers included, from compelling arbitration of these claims based upon predispute agreements or waivers and (2) gives purported victims the right to elect to air their grievances in courtrooms. That being said, if claimants (employees among them) want to arbitrate sexual assault or sexual harassment disputes, they are free to agree or otherwise elect do so.

A Bit of a Gray Area

In the employment context, it is not uncommon for employees to include discrimination, retaliation, wrongful termination, wage and hour or other unrelated claims within an action against their employers alleging sexual harassment or sexual assault. This begs the question: in such a circumstance and given the applicability of H.R. 4555, would the entire lawsuit be subject to litigation in court (as opposed to arbitration) at the plaintiff’s election, or only the sexual harassment or sexual assault causes of action?

As of now, the answer is unclear and we anticipate that, going forward, appellate courts will weigh in on the severability of claims unrelated to sexual harassment or sexual assault and whether those matters would continue to be arbitrable pursuant to predispute agreements or waivers. In the meantime, clever plaintiffs’ attorneys may insert sexual assault or sexual harassment claims into otherwise unrelated employment cases in an attempt to circumvent mandatory arbitration. Of course, this strategy would run afoul of the express agreements of parties who have consented to the arbitration of employment-related disputes, albeit not those arising out of sexual assault or sexual harassment, and call into question the FAA’s well-established policy favoring arbitration.

Next Steps

In the wake of the new amendment to the FAA, employers would be wise to revisit their current forms of arbitration agreement to carve out sexual assault or sexual harassment claims. But first, an important caveat for California employers.

Within the next few weeks, the U.S. Supreme Court is set to render its decision in Viking River Cruises, Inc. v. Moriana. At issue in that case is whether certain representative actions in California under PAGA are subject to arbitration pursuant to the FAA where a bilateral arbitration agreement is in place. Depending upon how the high court rules, employers in the Golden State may have additional reason to update their arbitration agreements.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.