On March 3, 2022, President Biden signed into law H.R. 4445, amending the Federal Arbitration Act, 9 U.S.C. 401, et seq. (“FAA”) to end compelled arbitration of sexual assault and sexual harassment claims. This change is another attempt to afford protections and exemptions to claims premised on sexual harassment/assault.
Generally, mandatory arbitration agreements in the employment context are legally enforceable and require employees to address their claims against the employer through arbitration.
Arbitration, like litigation, is binding on its participants. Historically, arbitration agreements have been favored as a natural extension of the principle that parties are free to contract on the terms of their choosing. Moreover, arbitration is viewed as an efficient way to adjudicate matters while also reducing over-extended court dockets. With this context in mind, H.R. 4445 represents a departure from previous policy favoring mandatory arbitration.
H.R. 4445, introduced in the wake of the #MeToo Movement, applies solely to sexual assault and sexual harassment claims. We previously saw the legal implications of the #MeToo Movement with the passage of the 2017 Tax Cuts and Jobs Act, which prohibits tax deductions for any settlement related to sexual harassment if the settlement is subject to a nondisclosure agreement.
Importantly, H.R. 4445 applies only to pre-dispute arbitration agreements. Pre-dispute arbitration agreements are agreements to arbitrate a dispute or claim that has not yet arisen. Critically, H.R. 4445 does not invalidate or otherwise render unenforceable agreements compelling arbitration of sexual harassment claims that arise after an employee’s claim accrues. Moreover, the law applies to all claims or disputes that arise after March 3, 2022.
As a practical consideration, H.R. 4445 does not address compelled arbitration of multiple claims brought by an employee, where only one claim, i.e., sexual harassment, is within the scope of H.R. 4445. In other words, will courts enforce arbitration agreements as to all claims except the sexual harassment claim? Will employees be forced to arbitrate all non-sexual assault/harassment claims while maintaining a lawsuit to pursue their sexual harassment claim? Will claimants be motivated to add a non-meritorious claim for sexual harassment to avoid arbitration? We await guidance from the courts on these issues.
If you have any questions regarding H.R. 4445 specifically, or any other questions regarding employment issues, please feel free to contact any one of Reminger’s Employment Practices Liability Group Members.
This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel. THIS IS AN ADVERTISEMENT
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