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November 22, 2022 Commentary

New Law Limits Mandatory Arbitration in Cases Involving Sexual Assault or Sexual Harassment

Deborah A. Widiss

In March 2022, Congress enacted a law that precludes employers from requiring employees to arbitrate disputes related to sexual assault or harassment. The new act, formally known as the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA), went into effect immediately. Employment lawyers need to understand the Act and consider how it should affect their practice.

According to a prominent recent study, about 60 million workers, or more than half of the non-unionized private-sector workforce, are subject to mandatory arbitration agreements. Many such policies also require workers to waive the right to bring class claims and prohibit disclosure of complaints. A growing body of empirical research suggests that workers are disadvantaged by being forced into arbitration. As #MeToo has highlighted the ongoing pervasiveness of sexual harassment, advocates have argued that forced arbitration and nondisclosure policies may contribute to the problem by shuttling complaints into private arbitrations rather than public court filings.

EFASASHA amends the Federal Arbitration Act to specify that victims of sexual assault or harassment can pursue claims in court and on a class-wide basis, even if they are bound by a predispute arbitration agreement. It applies to all agreements covered by the FAA, and thus many consumer claims as well as employment claims. Congress may soon pass a separate bill, the Speak Out Act, that would preclude enforcement of predispute nondisclosure and non-disparagement clauses in such cases.

As courts begin to resolve claims under the new law, two key issues are likely to arise. First, what counts as a “sexual assault” or “sexual harassment” dispute? And second, if a case includes both a covered dispute and other claims, will the whole matter be resolved in court, or will some claims be resolved in court and other claims in arbitration? As I plan to discuss more extensively in a full-length law review article, the statutory language goes a long way toward answering both of these questions, although courts will need to resolve some ambiguities.

Defining Sexual Assault and Sexual Harassment Disputes

EFASASHA incorporates legal standards from elsewhere in the law to define “sexual assault” and “sexual harassment” disputes. The former is “a dispute involving a nonconsensual sexual act or sexual contact,” as defined in federal criminal law. This includes any “intentional touching, either directly or through clothing” of sexualized areas of the body with an intent to abuse, humiliate, or gratify sexual desire, as well sexual acts involving genitalia regardless of intent. While the standard is derived from the criminal law, EFASASHA does not state the sexual assault must have been prosecuted. Rather, the victim simply must be “alleging” at least one incident that meets the definition.

“Sexual harassment dispute” is defined as a “dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” Federal employment statutes do not explicitly define sexual harassment. A large body of case law considers when workplace harassment is unlawful discrimination on the basis of sex. Under Supreme Court precedent, this includes both harassing conduct that ultimately culminates in a tangible employment action and conduct that is “severe or pervasive” enough to constitute an abusive environment. The conduct does not need to be sexualized or motivated by sexual desire. It may include harassment based on a general hostility to either sex, failure to conform to sex-based stereotypes, a victim’s sexual orientation or gender identity, or pregnancy or lactation. A harasser may be the same sex as the victim, so long as the evidence shows that the harassment was “because of sex.”

The reference to state and tribal law is also important. The National Women’s Law Center reports that in response to #MeToo, 22 states and the District of Columbia have passed more than 70 laws addressing sexual harassment. Many state laws cover smaller employers than federal law does, and some also allow interns, volunteers, and independent contractors, in addition to employees, to bring claims. Several states have extended the statute of limitations, and some have rejected the federal “severe or pervasive” standard in favor of a broader conception of actionable harassment. Harassing conduct may also give rise to state common law claims such as assault, battery, and negligent or intentional infliction of emotional distress.

Allegations of Sexual Assault or Harassment Together With Other Claims

Courts will also have to determine how the Act applies to cases that include allegations of sexual assault or harassment together with other legal claims. This could include, for example, retaliation, harassment or other discrimination on the basis of protected traits such as race or disability, wage and hour violations, etc. When the bill was debated in the Senate, individual Senators made vastly different statements regarding the bill’s scope. However, courts should begin their analysis with the statutory language itself rather than legislative history: The law provides mandatory arbitration and class-action waivers are not enforceable with respect to any “case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute” (emphasis added).

In statutory interpretation, when Congress uses different words—here “case” and “dispute”— within a single provision, it’s typically assumed to be a meaningful variation. In context, this suggests that the exception applies to an entire case that includes a sexual assault or harassment dispute, so long as the claims are “related.” Courts interpreting this language could reasonably look for guidance in procedural rules such as supplemental jurisdiction, compulsory counterclaims, and joinder of parties that address whether claims should be resolved in a single forum to promote fairness, efficiency, and avoid the risk of inconsistent results.

For example, if a victim alleged that her refusal to accept a sexual proposition was related to a subsequent failure to pay her overtime, a court would properly resolve discrimination and retaliation claims under Title VII and also any Fair Labor Standards Act claim. If, by contrast, the failure to pay overtime was a longstanding issue that preceded and was unconnected to any potential harassment, the court might address only the discrimination claim and send the FLSA claim to arbitration. That said, employers and their lawyers may decide it is more efficient to resolve all the claims in a given lawsuit in court, once it’s clear some are covered by EFASASHA.

More generally, management counsel should review their clients’ policies regarding arbitration to ensure compliance with the new Act, and plaintiffs’ counsel should recognize victims of sexual assault or harassment can now choose to pursue claims in court, regardless of what may be specified in an arbitration agreement. EFASASHA is an important limitation on mandatory arbitration provisions, and it can play a key role in helping address the scourge of sexual assault and harassment in American workplaces.

Deborah Widiss

Professor of Law and Associate Dean for Research, Indiana University Maurer School of Law

Deborah Widiss is a Professor of Law and Associate Dean for Research at the Indiana University Maurer School of Law. Her research and teaching focuses on employment law, statutory interpretation, and family law, and she practiced as an attorney at a national women’s rights advocacy organization.

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