New law blocks arbitration of sexual assault, harassment claims

Arbitration agreements have long been a standard practice across all industries. With the signing of H.R. 4445 into law by President Joe Biden, however, arbitration agreements are no longer enforceable against sexual assault or sexual harassment claims.

Standard practice no more

In February, Congress passed a historic bill some have referred to as the “#MeToo” bill. President Biden signed it into law on March 3, and as a result, certain claims are no longer allowed to be mandatorily arbitrated, regardless of a pre-existing arbitration agreement.

The new law also invalidates agreements that waive an employee’s right to file claims through a class action lawsuit. As a result, a predispute arbitration agreement that prohibits employees from filing a lawsuit against their employer, either individually or as a class action, based on alleged sexual harassment or assault is now invalid and unenforceable.

H.R. 4445 amends the Federal Arbitration Act (FAA), which was enacted in 1925 and last amended in 1990. The FAA preempts state laws regarding arbitration agreements, and therefore, predispute arbitration agreements are generally valid and enforceable.

The new law applies to agreements entered into before the bill’s signing where a conflict or dispute hasn’t yet arisen or accrued. It doesn’t, however, preempt existing claims that arose before the law went into effect.