Mandatory Arbitration Nixed For Cases Involving Sexual Assault or Sexual Harassment
In March 2022, Congress passed a law that precludes employers from requiring employees to arbitrate disputes related to sexual assault or harassment. The new act went into effect immediately.
More than half of the non-unionized private-sector workforce is subject to mandatory arbitration agreements. Many of those policies also require workers to waive the right to bring class claims and prohibit disclosure of complaints.
This law amends the Federal Arbitration Act to specify that victims of sexual assault or harassment can pursue claims in court and on a class-wide basis, even if an arbitration agreement binds them. It applies to all agreements covered by the FAA, which means that sexual assault or harassment claims outside of employment are also included.
Two issues will arise as courts begin to resolve claims under the new law. First, what is a “sexual assault” or “sexual harassment” dispute? Second, if a case includes a covered dispute and other claims, will the whole matter be resolved in court, or will some claims be resolved in court and other claims in arbitration?
The law goes a long way toward answering these questions, although courts must resolve some ambiguities.
Sexual Assault and Sexual Harassment Disputes
The law incorporates legal standards from elsewhere to define “sexual assault” and “sexual harassment” disputes. A sexual assault is a dispute involving a nonconsensual sexual act or sexual contact as defined in federal criminal law. This includes any intentional touching, either directly or through clothing of sexualized areas of the body with an intent to abuse, humiliate, or gratify sexual desire, and sexual acts involving genitalia regardless of intent.
While the standard comes from criminal law, the law does not say the sexual assault must have been prosecuted. The victim simply must be alleging at least one incident that meets the definition.
A “Sexual harassment dispute” is a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law. Federal employment statutes do not define sexual harassment. A large body of case law considers when workplace harassment is unlawful discrimination based on sex. Under Supreme Court precedent, this includes harassing conduct that ultimately culminates in a tangible employment action and conduct that is severe or pervasive enough to constitute an abusive environment. The conduct does not need to be sexualized or motivated by sexual desire. It may include harassment based on a general hostility to either sex, failure to conform to sex-based stereotypes, a victim’s sexual orientation or gender identity, or pregnancy or lactation. A harasser may be the same sex as the victim so long as the evidence shows that the harassment was because of sex.
Twenty-two states and the District of Columbia have passed more than 70 laws addressing sexual harassment. Many state laws cover smaller employers than federal law, and some also allow interns, volunteers, and independent contractors, in addition to employees, to bring claims. Several states have extended the statute of limitations, and some have a broader conception of actionable harassment. Harassing conduct may also give rise to state common law claims like assault, battery, and negligent or intentional infliction of emotional distress.
Courts will also have to decide how this law applies to cases that include allegations of sexual assault or harassment with other legal claims. This could include wage and hour violations. When the bill was debated in the Senate, individual Senators made vastly different statements regarding the bill’s scope. The law says mandatory arbitration and class-action waivers are not enforceable for any case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
Effectively, the language suggests the exception applies to an entire case that includes a sexual assault or harassment dispute, so long as the claims are related.
Employers should review their policies regarding arbitration to ensure compliance with the new law.