By Tamia Sutherland & Russ Bleemer
The U.S. Senate passed H.R. 4445, Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, this morning on a voice vote.
The bill had bipartisan support in both legislative chambers and quickly cleared the 60-vote procedural step to advance in the Senate. The House had passed the bill on Monday by a vote of 335-97.
President Biden has signaled he will sign the bill, which will take effect immediately. The Office of Management and Budget expressed the administration’s support in a Statement of Administration Policy letter, published Feb. 1, noting, “This bipartisan, bicameral legislation empowers survivors of sexual assault and sexual harassment by giving them a choice to go to court instead of being forced into arbitration.”
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act invalidates pre-dispute arbitration agreements and waivers of joint proceedings for individuals alleging conduct constituting a sexual harassment dispute or sexual assault. It effectively overrides employment contracts that require arbitration and allows all cases which include sexual assault or harassment claims to be resolved in court, despite the signed agreement containing an arbitration clause.
The language targets predispute arbitration agreements and predispute joint-action waivers, but not ad hoc or post-dispute processes. In fact, the law apparently allows employees an option to stay in existing arbitration agreements, noting at the outset that an arbitration clause will not be valid “at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct. . . .” The law focuses on the filing of cases; a determination of the arbitrability of matters is sent by the law to courts, not arbitrators. . . .”
In introducing the bill this morning, Senate Majority Leader Charles Schumer, D., N.Y., noted the bipartisan agreement on the bill, and emphasized that it will apply retroactively. The law states that it “shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” Said Schumer, “That’s an important point that hasn’t gotten enough attention.”
The text of the bill is available here.
Arbitration clauses in employment contracts have been characterized by legislators as “forced” and were discussed in depth at the Nov. 16 House Judiciary hearing, “Silenced: How Forced Arbitration Keeps Victims of Sexual Violence and Sexual Harassment in the Shadows.” A blog post about the Nov. 16 hearing can be accessed here, and the hearing can be viewed in its entirety at https://bit.ly/3wTDLkf.
Some legislators and attorneys were worried that the proposed reforms could unwittingly fail in practice. There is concern because litigation can be more expensive; the bill does not prevent companies from forcing people to sign nondisclosure agreements that also could hide sexual misconduct allegations, and plaintiffs’ attorneys could be incentivized to include sexual harassment allegations in cases that have nothing to do with sexual harassment to evade arbitration.
“Unfortunately, some of the language in the statute is potentially ambiguous,” says Christopher C. Murray, a shareholder in the Indianapolis office of Ogletree, Deakins, Nash, Smoak & Stewart, and co-chair of the firm’s Arbitration and Alternative Dispute Resolution Practice Group. He explains:
Specifically, the statute bars enforcement of certain arbitration agreements with respect to “cases” relating to sexual harassment and sexual assault disputes. The statute probably should state it bars enforcement of agreements with respect to ‘claims’ relating to sexual harassment and sexual assault disputes. Some plaintiffs’ counsel may try to make hay out of this ambiguous use of ‘cases’ and seek to expand the scope of the statute to bar the arbitration of other types of claims that happen to be in the same case. I expect that effort by plaintiffs’ counsel will ultimately be unsuccessful under cases like CompuCredit Corp. v. Greenwood, but the ambiguity may still result in some extra litigation in the short term. . There’s no indication the new law is intended to change the “Congressional command” analysis for claims under other federal statutes that have nothing to do with a sexual harassment or sexual assault dispute.
In CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012), the Supreme Court held that because the Credit Repair Organizations Act is silent on whether claims can be arbitrated, the Federal Arbitration Act required the plaintiff’s arbitration agreement to be enforced according to its terms. Moreover, the case stands for the proposition that an arbitration agreement should be enforced if the claims at issue are federal statutory claims, unless the mandate of the Federal Arbitration Act, 9 U.S.C. § 1, et seq., has been overridden by a contrary Congressional command. Parties likely will dispute whether the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which specifically amends the FAA, changes that analysis in any way for claims under federal statutes that do not relate to sexual harassment or assault.
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The Senate also was concerned about the misuse of sexual assault and harassment claims to piggyback arbitrable claims into court, and this morning addressed the issue.
Sen. Joni Ernst, R., Iowa, emphasized that the act should not be used for other workplace disputes. “Those claims are meaningfully different,” she said, emphasizing that if an employment agreement has a predispute arbitration provision and a sexual assault or harassment claim is brought with another claim, and the assault or harassment claim is later dismissed, “the court should remand the other claim back to the arbitration” system.
Ernst told the Senate that the presence of sexual assault or harassment claims “should not effectively destroy arbitration in employment litigation.”
Ernst pledged to work with Schumer and other senators, she said, “if there are indications that there is gaming of the system” by claimants or lawyers.
Sponsor Kirsten Gillibrand, D., N.Y., expressed appreciation for work on the bill by Ernst and Sen. Lindsey Graham, R., S.C., and agreed with Ernst’s cautions. “I do not believe that survivors of sexual assault and harassment will use the claims” to avoid arbitration, she said, adding, “If those claims on assault or harassment are dismissed, [victim claimants] will go back to arbitration.”
“But,” continued Gillibrand, “it is important that all claims related to assault or harassment are dealt with at the same time” to avoid sending victims to multiple forums. “If victims and attorneys break those rules, they can be sanctioned in court,” she said.
Ahead of the voice vote, Lindsey Graham said, “It does not hurt business to make sure that people harassed in the workplace [get justice]. It helps business. . . . Arbitration has its place in business. . . . [But] you’re not going to sign away your life.”
He concluded, “This is not bad for business. This is good for America.”
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The passing of the Ending Forced Arbitration Act marks a significant national reform in the fight against sexual misconduct in the workplace that emerged from the bravery of the #MeToo movement. It also may be a harbinger of more to come in terms of arbitration restrictions. The White House statement supporting the legislation, which now goes to the president’s desk to be signed into law, ended by noting,
The Administration also looks forward to working with the Congress on broader legislation that addresses these issues as well as other forced arbitration matters, including arbitration of claims regarding discrimination on the basis of race, wage theft, and unfair labor practices.
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Sutherland, a second-year law student at the Howard University School of Law, in Washington, D.C., is a CPR 2021-22 intern. Bleemer edits Alternatives to the High Cost of Litigation for CPR.