The Feds Say Me Too! In Limiting the Use of Employment Arbitration Agreements

California courts and legislature have been pummeling employers’ ability to require comprehensive arbitration agreements. Well, the federal government has now joined in. In an astounding rare example of legislative bipartisanship, both Congress and the Senate approved the passing of the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act amending the Federal Arbitration Act (“FAA”) to limit the ability of employers to require arbitration of certain types of claims (the “FAA Amendment”). President Biden signed the FAA Amendment into law on March 3, 2022, making it effective immediately.

Who is subject to the FAA Amendment?

All employers who engage in some type of interstate commerce are subject to the FAA.

How does the FAA Amendment change what employers can do in employment arbitration agreements?

The FAA Amendment prohibits employers from requiring employees to waive their right to litigate in any forum, as an individual or member of a class, the employee’s claims of sexual assault or sexual harassment, until after the employee has actually made such a claim. In other words, an employee’s agreement to privately arbitrate claims of sexual assault or sexual harassment will only be valid if the employee agrees to it after submitting the claim to the employer.

How does the FAA Amendment affect arbitration agreements that employees signed before this law went into effect?

The FAA Amendment applies to disputes or claims that arise on or after March 3, 2022 (the effective date of the FAA Amendment). The FAA Amendment does not say that existing agreements must be amended. A reasonable reading of the law suggests that by virtue of the FAA Amendment becoming effective, employees will automatically have the right not to comply with an employment arbitration agreement if they have a claim of sexual assault or sexual harassment and that therefore they could not be compelled to arbitrate those claims, regardless of any arbitration agreement they previously signed.

Who decides whether the FAA Amendment applies to a particular dispute?

The applicability of the FAA Amendment to an arbitration agreement and enforceability of that agreement, if the FAA Amendment does apply, will have to be determined by a court rather than an arbitrator, even if the arbitration agreement delegates that responsibility to an arbitrator.