By Jaimee K. Wellerstein, Esq.
As the arbitration landscape continues to evolve, as reported here and here, employers must prepare for another adjustment. On March 3, 2022, President Biden signed the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” (the “Act”) into law. The Act amends the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (FAA) and makes mandatory pre-dispute arbitration agreements between employers and employees that would otherwise require the parties to arbitrate claims of sexual assault or sexual harassment invalid and unenforceable. Employees alleging conduct that constitutes sexual harassment or sexual assault dispute (“Covered Claims”) can now bring Covered Claims in court rather than being required to arbitrate them. The Act also allows the employee to bring a representative class action for the Covered Claims.
Importantly, the Act applies to “any dispute or claim that arises or accrues after” March 3, 2022, regardless of the date of the arbitration agreement. This means that if the alleged sexual misconduct occurred prior to March 3, 2022, then employers can still compel arbitration as to those claims, assuming they already entered into a valid arbitration agreement with the employee.
The Act also requires courts, not arbitrators, to determine whether an arbitration agreement is valid and enforceable as to sexual harassment or sexual assault claims. Civil courts will make the determination even if the arbitration agreement is challenged, “specifically or in conjunction with other terms of the contract containing such agreement,” or if the arbitration agreement contains a clause that purports to delegate that determination to the arbitrator.
Employer Takeaway:
Prior to President Biden signing the Act and before the Ninth Circuit upheld California’s sweeping prohibition on mandatory arbitration agreements in the form of AB-511 (which is still somewhat in flux), employers routinely required employees to sign arbitration agreements as a condition of their employment. Mandatory arbitration agreements were often upheld so long as they met certain factors and were not deemed unconscionable.
With the enactment of the Act coupled with AB-51, employers are advised to update their arbitration agreements to ensure that they comply with both the Act and AB-51.
If you have any questions about how this decision may impact your business or need assistance preparing a new arbitration agreement, please contact your attorneys at Bradley + Wellerstein LLP. We are here to help.
1AB 51 generally precludes employers from using mandatory arbitration agreements as a condition of employment.
Jaimee K. Wellerstein, Esq. is a Partner at Bradley + Wellerstein LLP, and the Head of the firm’s Employment Department. Jaimee concentrates her practice in representing employers in all aspects of employment law, including defense of wage and hour class actions, PAGA claims, discrimination, retaliation, harassment, wrongful discharge, misclassification, and other employment-related lawsuits. She also provides employment counseling and training in all of these areas.
Jaimee routinely represents employers in federal and state courts and in arbitration proceedings throughout the state, as well as at administrative proceedings before the Equal Employment Opportunity Commission, the California Department of Labor Standards Enforcement, the United States Department of Labor, and other federal and state agencies.
Jaimee assists as a Legal Advisor to CALSAGA and is a member of ASIS International. She is rated AV-Preeminent by Martindale-Hubbell, the highest peer rating available. jwellerstein@bwlawpros.com