Many employers require their employees to sign an arbitration agreement whereby the employee agrees to arbitrate any employment claim instead of pursuing litigation. Employers may want to reconsider their approach after a new federal law was recently passed limiting the enforceability of such agreements for certain claims.

The federal “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” (the “Act”) was signed into law on March 3, 2022. The Act allows employees who have signed arbitration agreements the option to pursue claims of sexual assault or sexual harassment either in court or in arbitration. The Act is considered a product of the #MeToo movement and applies to claims that arise after March 3, 2022, even if the arbitration agreement was entered into before this date. It does not, however, affect otherwise valid arbitration agreements that are not related to sexual assault or sexual harassment.

So, what does this mean for employers with arbitration agreements? Employers should re-evaluate the pros and cons of mandatory arbitration agreements. Many employers favor arbitration over litigation because it is generally perceived as being less expensive and speedier than litigation, although this is not always the case. Employers also favor arbitration because it is a private process and eliminates the risk of a runaway jury. On the other hand, an arbitration process that is less expensive and speedier may result in more claims being filed. Also, employers may not have the same ability to file dispositive motions in arbitration as they would in litigation. These factors, among others, will continue to be relevant for claims that do not involve sexual assault or sexual harassment.

But, what happens if an employee files claims that involve sexual assault or sexual harassment and other claims that are not covered under the Act?  Will the employee be able to simultaneously pursue their claims in arbitration and court?  Is this a desirable outcome for an employer? Probably not. However, some employers may conclude that the benefits of arbitration for all other claims outweighs the downside of having to defend multiple claims in different venues. Other employers may reach a different conclusion and will reassess whether to continue entering into arbitration agreements.

Whatever approach an employer believes is best for its business, the best defense to any harassment claim starts with making sure that the employer is taking appropriate steps to prevent such claims. This includes:

  • Having a well written, comprehensive anti-harassment and discrimination policy
  • Ensuring that all employees, particularly managers and supervisors, receive appropriate training
  • Promptly and thoroughly investigating all claims of employee misconduct, especially harassment and discrimination claims
  • Taking appropriate corrective or disciplinary action when an employee engages in misconduct
  • Creating a workplace environment and culture where all employees are treated with dignity and respect
  • Establishing credibility with employees so they are comfortable raising their concerns internally instead of filing formal agency complaints, lawsuits or a demand for arbitration

This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.