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ANALYSIS: #MeToo Law Changes Arbitration Landscape for Employers (CORRECTED)

March 31, 2022, 9:00 AM

The recently enacted ban on forced arbitration for sexual assault and harassment claims is a game-changer for workers who are affected by these actions but are covered by forced arbitration agreements, as the law allows employees to sidestep forced arbitration and bring these claims to court.

The passage of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 gives employers yet another reason to take workplace sexual assault and harassment seriously. And it could have a widespread impact on employers and employees, since it’s estimated that more than 60 million American workers are covered by arbitration agreements.

As employers navigate this new landscape, they must consider the law’s implications for their businesses as well as what practices and policies they should reinforce or change to protect their employees from sexual assault and harassment in the future.

Immediate Employer Implications

The immediate implication of the law is that—moving forward—it renders provisions in arbitration agreements unenforceable if they force arbitration or waive joint, class, or collective action for sexual harassment or sexual assault claims. The law retroactively applies to agreements signed pre-March 3 (the date President Biden signed the bill into law) as well as all agreements moving forward.

However, the law is not retroactive in terms of actionable claims, covering only sexual assault and harassment claims transpiring on or after March 3. And while the law does bar employers from forcing arbitration on sexual assault or harassment claims, it doesn’t bar employees from electing to arbitrate these claims.

In response to the law, employers must evaluate their arbitration agreements in this context and decide how to move forward. Some common options for employers include drafting more general agreements, providing carve-outs for sexual assault or harassment within the agreements, or doing away with them altogether.

The Law’s Broad Reach

Employers reconsidering their agreements should be aware that the new law provides a broad bar on forced arbitration for work-related sexual assault or harassment and includes claims actionable under federal, state, and tribal laws, such as:

  • quid pro quo sexual harassment, which involves the exchange of employment benefits for sexual advances;
  • hostile work environment sexual harassment, which involves subjecting an employee to severe or pervasive harassing conduct that is demeaning to the employee’s sex or is sexual in nature;
  • sexual assault, which involves unwanted sexual contact usually induced by fear or false pretense; and
  • state law and tribal law definitions of sexual assault and harassment, which may expand beyond federal definitions.

Interestingly, local laws on sexual assault and harassment aren’t included in this law. And while the categories above are broad, local laws that may provide additional protections beyond federal, state, and tribal laws aren’t included in this statute if they are more stringent—or offer more protections—than laws at the federal, state, or tribal levels.

Reach Beyond Sexual Assault, Harassment?

Though the law bars forced arbitration only for sexual assault and harassment claims, it remains an open question as to whether cases with sexual assault or harassment claims as well as unrelated claims will be bifurcated or remain as one case that will head to court. This means that employers may face more lawsuits more often—and potentially on a broader range of claims—depending on how courts interpret the law.

As my Bloomberg Law colleague Erin Webb explained, while the default expectation may be to read this law narrowly and only allow for sexual assault and harassment claims that fall under a forced arbitration agreement to go to court, there are other factors that lean toward a more expansive interpretation.

For example, the language of the law and its legislative history may provide an interpretation that allows employees to bypass arbitration and go to court for additional claims relating to the underlying sexual assault or harassment claims.

Because of this possibility, employers that use arbitration agreements need to prepare for more litigation and the likelihood of increased legal spend in the future—particularly if cases involving sexual harassment or sexual assault claims in addition to other claims can’t be separated into claims to be arbitrated and claims to be litigated.

Prevention and Next Steps

In response to the passage of the law, employers must use this time as an opportunity to review their current practices and policies to determine if they sufficiently protect their employees from sexual assault and harassment—regardless of whether they use arbitration agreements.

In a policy and procedure audit, employers should review the following and ensure that their organization has:

  • an adequate Equal Employment Opportunity (EEO) policy;
  • an adequate anti-harassment and anti-discrimination policy;
  • an effective structure for reporting sexual assault and harassment;
  • an effective anti-workplace violence policy and program in place;
  • an effective investigation procedure for sexual assault and harassment claims;
  • a culture that promotes respect and values dignity; and
  • a sufficient anti-harassment and anti-discrimination training program in place for supervisors and employees.

Perhaps most importantly, employers must equally and effectively enforce their policies and procedures, as even the strongest of them may not prevent sexual assault and harassment claims if there isn’t adequate enforcement.

The steps for the audit can help employers to protect employees from sexual assault and harassment and can protect organizations from a liability perspective. While there’s no way to prevent all sexual assault or harassment claims in a workplace context, taking active steps to prevent these behaviors can help to ensure a better workplace for all.

(Corrected the seventh paragraph to make clear that hostile work environment sexual harassment involves subjecting an employee to severe or pervasive harassing conduct that is demeaning to the employee’s sex or is sexual in nature.)

Bloomberg Law is analyzing how the enactment of the new forced arbitration law affects lawyers in practice areas like employment, M&A, securities, and commercial law. Click here for the original article on the law’s passage, which will be updated to add links to each follow-up analysis as it is published.

Bloomberg Law subscribers can find related content in our Labor & Employment Practice Center, Practical Guidance: Sexual Harassment , Practical Guidance: Sexual Orientation & Gender Identity, and In Focus: Sexual Harassment resources.

If you’re reading this on the Bloomberg Terminal, please run BLAW OUT <GO> in order to access the hyperlinked content, or click here to view the web version of this article.

To contact the reporter on this story: Francis Boustany in Washington at fboustany@bloombergindustry.com