President Biden is expected to sign legislation that explicitly amends the Federal Arbitration Act to make pre-dispute arbitration agreements and class (or joint) action waivers unenforceable for claims involving sexual assault or sexual harassment.
One thing is certain: the act is likely to have far-reaching consequences in the context of employment discrimination law and beyond.
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (H.R. 4445) bans pre-dispute arbitration agreements or joint-action waivers for individuals alleging workplace sexual harassment or sexual assault. It applies to claims involving sexual harassment and sexual assault and does not apply to other claims of sexual discrimination in the workplace, such as claims for unequal pay.
It also does not apply to claims for discrimination based on age, race, or sexual orientation, unless they also involve allegations of sexual harassment or assault. The White House, however, has recently advocated for broader legislation that would prohibit mandatory arbitration in other employment contexts.
The act applies to sexual assault and harassment claims that arise after the date of enactment and invalidates pre-dispute arbitration agreements and class action waivers even if those agreements or waivers were executed before the passage of the act, so long as the claims arose after its passage.
It is not expected to have an impact on currently pending proceedings involving sexual assault or harassment, but will apply to future claims, even if the potential plaintiff had signed an arbitration agreement or class action waiver years prior to 2021.
Expected Impact on Cases Filed, Settlements
The new law will have a major impact on employment litigation as we now know it.
First and foremost, there is likely to be an explosion in the number of cases filed and litigated in state and federal court given the prevalence of employment arbitration agreements and the fact that the act will invalidate those agreements for certain types of claims.
Academic commentators have noted the dearth of case law development under Title VII and similar state statutes given the widespread use of arbitration agreements by most large employers. Observers can expect to see not only many more cases filed, but also
Second, plaintiffs can expect to receive settlement offers in pre-litigation mediation or dispute resolution that are appreciably greater than they would have been before passage of the law. This prediction is based on the fact that most (though not all) arbitration agreements provide for strict confidentiality.
Not surprisingly, the guarantee of confidentiality tends to put downward pressure on settlement amounts since there is less risk of unwanted exposure and publicity. The threat of a public filing, along with the strong presumption of public access to the courts, however, means that potential defendants likely will be willing to pay more to avoid litigation.
Third, for the cases that do not settle, the act should result in increased jury verdicts. Jury verdicts in sexual assault and harassment cases have seen a marked increase recently in the wake of movements like #MeToo. With more cases being filed and litigated in federal and state court, that trend should only continue.
Finally, one note of caution: Even though the act purports to prohibit the enforcement of class or collective action waivers for cases involving allegations of sexual harassment or assault, it is not likely to have a significant impact on the number of class action verdicts. This is so because the act does not cite or purport to overrule the applicable U.S. Supreme Court precedents like Wal-Mart Stores Inc. v. Dukes severely limiting the use of Federal Rule of Civil Procedure 23 in analogous circumstances.
Thus, without further changes to federal law, we should not expect to see a significant expansion in the number of successful class action lawsuits in this area, given the stringent standards that still apply to the certification of a class.
However, because the act does seek to override pre-dispute class action waivers, plaintiffs almost certainly will try to file class actions in federal court, and their ability to do so might (and probably will) materially affect litigation in this field, either by forcing defendants to mount an initial defense or by yielding pre-certification settlements in higher numbers than under the status quo.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Roberta (“Robbie”) Kaplan is the founder of Kaplan Hecker & Fink LLP. In addition to a complex civil litigation practice, she advises clients on issues relating to discrimination, diversity and inclusion.
Julie Fink is the managing partner at Kaplan Hecker & Fink LLP. She leads the employment practice and oversees all aspects of the firm’s management, growth, and strategic planning.
Rachel Tuchman is an associate at Kaplan Hecker & Fink LLP . She represents clients in complex civil litigation and investigations pertaining to gender discrimination, #MeToo issues, and Title VII and Title IX litigation in education and workplace settings.