Amendment to the Federal Arbitration Act: No Mandatory Arbitration of Sexual Assault or Harassment Disputes

The Federal Arbitration Act has been with us since 1925.  It was passed by Congress to overcome many courts’ refusal to recognize the legitimacy of arbitration. Among other things, it preempts state laws that limit or forbid arbitration.  The Act has rarely been amended. 

              Arbitration grows into new areas

              Arbitration originally developed as a way for merchants to have their disputes resolved quickly  by a knowledgeable individual.  But arbitration has now found its way into employment agreements and consumer agreements.  This has allowed large corporations to –in the view of many potential plaintiffs – “force” employees and consumers to arbitrate their disputes rather than submitting them to courts and juries.  The has led to mounting criticism of arbitration creeping into so many areas of American life.  We seem to have become, in the words of Ninth Circuit, an “arbitration nation.”  Aspic Engineering & Construction Co. v. ECC Centcom Constructors, 913 F.3d 1162 (9th Cir. 2019).

              Me too and “forced arbitration”

With the Me-too movement, the use of arbitration clauses to require employees to bring sexual assault and harassment claims to arbitration rather than to court faced significant criticism and even outrage. The combination of unequal bargaining power and efforts to keep the disputes from seeing the light of day struck many as particularly unfair.              

              Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021

              In light of this controversy, Congress has now passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021.  President Biden is expected to sign it. 

              The Act amends the Federal Arbitration Act to provide that “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.”  Parties traditionally have been able to agree to let an arbitrator rather than a court decide whether a dispute is subject to arbitration.  But the Act allows a party resisting arbitration to have the court decide the matter rather than an arbitrator, “irrespective of whether the agreement purports to delegate such determinations to an arbitrator.”

              Claimants may still arbitrate if there is a clause

              Despite the criticism of mandatory arbitration, some claiming parties may prefer arbitration to court.  For example, some claimants may prefer not to have one of the most  traumatic event or series events in their lives aired in public and possibly detailed in news stories and press coverage.  Arbitrations are much more private than court.  Also, arbitrations are typically less formal and less expensive than litigation. This can make it easier for some claiming parties to find counsel to take their cases.  And, as a practical matter, arbitration hearings take place on a date certain rather than when a court can squeeze them into a crowded calendar. This makes the hearing process less disruptive to the parties’ lives.

              In apparent recognition that some parties bringing sexual assault or harassment claims may prefer arbitration, the Act gives the claimant the option of challenging the arbitration clause or not.  So, it is up to the claiming party to decide whether or not to arbitrate.  But it remains to be seen whether corporations will continue to include arbitration clauses for sexual assault or harassment claims in their employee agreements.  Of course, the parties can always agree to arbitrate their dispute.  But post dispute agreements to arbitrate are rare. 

              Looking forward

              As we have become more of an “arbitration nation,” opposition to the expansion of Arbitration is inevitable.  Arbitration developed in the commercial context, but it has moved into more e areas of life over time.  The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 represents as step in contracting arbitration’s expansion.  Whether or not this is the beginning of a trend or simply a reaction to a particularly controversial use of mandatory arbitration remains to be seen.