On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “Act”). Under the Act, employers can no longer enforce mandatory arbitration clauses in employment contracts when employees pursue claims based on allegations of sexual assault or sexual harassment. Here are some more details on the Act as well as some important tips for employers in South Carolina:
What South Carolina Employers Need to Know about the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 amends the Federal Arbitration Act (FAA) to include provisions that are specific to employee sexual assault and sexual harassment claims. As amended by the Act, the FAA now states:
“[A]t the election of the person alleging conduct constituting a sexual harassment dispute or a sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, 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.”
The Act applies to claims arising or accruing on or after March 3, 2022. Even if an employment agreement containing a mandatory arbitration clause predates the Act’s effective date, the clause can still be voided at the employee’s election in relevant cases. Other notable aspects of the Act include:
- The Act Applies to Class and Collective Action Waivers As Well As Mandatory Arbitration Clauses – While the Act will impact most employers through its invalidation of mandatory arbitration clauses in sexual assault and sexual harassment cases, it also applies to class and collective action waivers.
- Employees Can Choose Whether to Invalidate Their Mandatory Arbitration Clauses – The Act does not automatically invalidate all mandatory arbitration clauses in sexual assault and sexual harassment cases. Rather, it gives employees the option to choose between arbitration and litigation even if they have previously agreed to arbitrate.
- Agreements to Arbitrate Once a Dispute Arises Remain Binding – While employees can now sidestep their prospective agreements to arbitrate under the Act, an employee’s agreement to arbitrate after initiating a sexual assault or sexual harassment claim remains binding (assuming the agreement is otherwise enforceable under applicable law).
- The Act Applies to Claims Filed Under State and Federal Law – The Act allows employees to avoid mandatory arbitration in sexual assault and sexual harassment cases filed under both state and federal law. Thus, whether an employee bases his or her allegations on the South Carolina Human Affairs Law or Title VII of the Civil Rights Act of 1964, he or she will have the option to pursue litigation in lieu of arbitration.
- The Act Applies to “Cases,” Not Just Individual Claims – While the Act comes into play when an employee files a claim alleging sexual assault or sexual harassment, it applies to the entire “case” in which the claim is filed. While it remains to be seen how courts in South Carolina and the Fourth Circuit will interpret this provision, plaintiffs’ lawyers will likely argue that it allows employees to shoehorn in other claims that would otherwise be subject to mandatory arbitration as well.
What Should South Carolina Employers Do In Response to the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021?
Now that the Act is effective, what should South Carolina employers do to address its implications? While employers will need to address the Act’s implications on a case-by-case basis, here are some overarching considerations:
Employers Do Not Need to Re-Write Their Arbitration Clauses to Exclude Sexual Assault and Sexual Harassment Claims
At this time, employers do not need to re-write their arbitration clauses to ensure that they remain applicable to claims other than those for sexual assault and sexual harassment in response to the Act. The Act does not render arbitration clauses in employment contracts automatically void, nor does it allow employees to void these clauses entirely. The Act is specific to claims for sexual assault and sexual harassment—although it is possible that employees may try to bring other claims in the same “case” as discussed above.
Employers Should Consider Whether Other Revisions are Necessary
While employers do not need to re-write their arbitration clauses to ensure their enforceability in response to the Act, it will still be prudent for employers to consider whether other revisions may be necessary. Are your company’s mandatory arbitration clauses overly broad or outdated in other respects? If so, this is a concern you will want to address, particularly in light of the fact that these clauses are likely to face enhanced scrutiny in cases involving sexual assault and sexual harassment claims.
Employers Should Review Their Sexual Assault and Sexual Harassment Policies
Given that employees now have the option to pursue claims in court under the Act, employers should review their sexual assault and sexual harassment policies to ensure that they are adequate. The best way for employers to avoid liability for sexual assault and sexual harassment claims is to avoid these claims entirely.
Employers Should Monitor for Relevant Court Decisions
In light of the questions that remain unanswered regarding the Act’s implications, employers should monitor for relevant court decisions. For example, if an employee tries to bring unrelated claims in a single “case” under the Act and the court grants a motion to sever the employee’s claims sending the unrelated claims back to arbitration, this is a development of which employers will want to be aware. Conversely, if courts broadly interpret the Act resulting in increased employment-related litigation, this is a factor that employers will need to consider when developing and updating their internal policies and procedures.
Speak with a South Carolina Employment Lawyer at Gignilliat, Savitz & Bettis, LLP
Gignilliat, Savitz & Bettis, LLP is a South Carolina employment law firm that exclusively represents employers. If you would like to speak with one of our lawyers about your company’s needs, please call 803-799-9311 or contact us online today.