Arbitration Clause Won’t Prevent Sexual Harassment Lawsuits

Over the years, many employers include pre-dispute mandatory arbitration agreements with new employees (sometimes in an employee handbook, and otherwise in a separate agreement). Both parties agree to submit any employment-related disputes to arbitration, rather than to the traditional court process. Arbitration is an alternative dispute resolution technique that is very different than a court case, in front of a judge and jury. A dispute is heard by an arbitrator, who follows the applicable law, and issues a binding decision on the parties. These decisions, in general, can not be appealed, so the decision is final.

In March 2022, a new federal law ended forced arbitration of sexual harassment claims. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, H.R. 4445 (The “Act” or “EFASASHA”), was signed by the President. The Act prohibits the forced arbitration of sexual harassment claims and allows these claims to be brought in court even if the Employee is bound by a mandatory arbitration agreement. Mandatory pre-dispute arbitration agreements are not invalid or unenforceable, but the new law permits the employee to be a named party to a lawsuit alleging sexual harassment or sexual assault under federal or state law.

Net result for employers is that an employee with a sexual harassment claim for conduct that arose on or after the date of the EFASASHA (March 3, 2022) can invalidate any pre-dispute arbitration agreement even if it was signed prior to March 3. The new law goes beyond employment agreements, and also covers independent contractors, customers, and any other persons with whom a business may try to enforce mandatory arbitration. Arbitration agreements can be enforced for other workplace and employment disputes, such as claims for retaliation, wage and hour, and discrimination.

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