Say Goodbye to Mandatory Arbitration for Sexual Harassment Claims

HR 4445

On February 7, 2022, the U.S. House of Representatives overwhelmingly approved a bill that dramatically affects the enforceability of arbitration agreements for workplace sexual harassment and sexual assault claims. The Senate followed suit and passed the bill on February 10, 2022. President Biden is expected to sign the bill into law.

Effectively, the bill provides that an arbitration agreement signed by an employee prior to a claim or dispute in which sexual harassment or assault is alleged would be voidable at the employee’s discretion.  An employee may opt to arbitrate, but cannot be forced to arbitrate any longer. When the bill is signed into law, it will affect tens of millions of workers, and employers can be forced to face jury trials for such claims, making this legislation one of the more impactful federal employment law changes in recent times. The legislation, part of the “Me Too” movement, is intended to bring more public awareness to workplace sexual harassment and sexual assault, and, presumably, have a useful deterrent effect.

There are already concerns about the bill’s breadth, and the trend towards reducing the role of arbitration. For example, the U.S. Chamber of Commerce has commented that, “Arbitration provides a fair, effective, and less expensive means of resolving disputes compared to going to court. Empirical studies demonstrate that employees in arbitration do just as well, or in many circumstances, considerably better, than in court.” And don’t forget the expediency of arbitration compared to civil litigation, especially in the time of never ending COVID delays.

What This Means for California

Although constantly evolving, current California law provides that arbitration agreements must be voluntary – and not made a condition upon which employment is contingent.  But with the expected passage of this bill, even an employee who chose to voluntarily enter into an arbitration agreement with their employer will have the option to avoid that arbitration obligation for these harassment and assault claims.

What This Means for Businesses and Business Owners

Historically, businesses have preferred to include arbitration agreements with their employees, for a variety of reasons including cost control and efficiency. Will that approach continue to make sense, after President Biden signs the new bill into law? For now, the answer is probably yes. Although the scope of arbitration agreements, and the ability to enforce them, have taken a hit in recent years, there’s no denying the same benefits —more efficient, cheaper, faster – remain attractive.  But California business owners need to pay close attention to this area of employment law, and revisit their existing policies and agreements, because it is changing on an increasingly frequent basis and headed in a direction that is decidedly more favorable to employees.

If you have any questions or need counseling on the current state of arbitration agreements, or other employment law challenges, Dunn, DeSantis, Walt & Kendrick, LLP can provide guidance to your business.

 

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