Federal Laws and Legislation you won’t want to miss

Arbitration Agreements and your Business.

On March 3, 2022, Biden signed H.R. 4445 – Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“The Act”) into law.

Effective immediately, clauses that require mandatory arbitration of sexual assault and sexual harassment claims are prohibited.  Additionally, any joint-action (for example, a class action claim) waiver clause is equally prohibited.  The Act, however, does not affect claims that arose or accrued before March 3, 2022.

The Act states that a court (rather than an arbitrator) must determine the validity and enforceability of any clause or waiver prohibited by The Act.  This gives employees the option to seek invalidation of an existing arbitration agreements or joint-action bans.  Therefore, the employee may choose to either arbitrate these claims or pursue them in court regardless of any existing contractual agreements with their employers.

Currently, the Act does not affect otherwise valid arbitration agreements for claims that are not related to sexual assault and sexual harassment. However, H.R.963 – the Forced Arbitration Injustice Repeal (“FAIR”) Act of 2022 passed in the House on March 17, 2022.  

The FAIR Act seeks to invalidate pre-dispute arbitration agreements and pre-dispute joint-action waivers with respect to any employment dispute, consumer dispute, antitrust dispute, or civil rights dispute. It would allow employees to sue their employers in cases of wage theft, harassment or discrimination, as well allow customers to sue companies over fraud, privacy violations, product liability and more.

In a Statement of Administration Policy issued by the White House, the Biden Administration voiced its support of the FAIR Act, stating, “[n]ot only do these clauses prevent consumers and workers from having a fair shot at justice, they also hide companies’ wrongdoing from other consumers who are choosing between products and workers who are deciding between jobs. Eliminating the use of these clauses would increase incentives for employers to prevent and remedy problems in the workplace and in their business practices.” 

While the legislation has the support of the White House, its fate is currently held by the Senate, whose legislative body received the Act on March 21, 2022. An earlier version of the FAIR Act was unsuccessful in 2019, during the Trump Administration. However, you will want to keep an eye out on this legislation, as its support from the Biden Administration and Democrat-majority Senate may mean the scales tip in favor of its success this time.