President Biden Signs Law Prohibiting Forced Arbitration for Sexual Harassment Claims

Labor & Employment

On Thursday, March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, a law prohibiting forced arbitration for claims involving alleged sexual assault and sexual harassment. "Sexual assault" is defined as a non-consensual sexual act or sexual contact as such terms are defined under applicable federal, state or tribal law. "Sexual harassment" is defined as (1) unwelcome sexual advances; (2) unwanted physical contact that is sexual in nature; (3) unwanted sexual attention (including sexual comments and propositions); (4) conditioning professional benefits on sexual activity; or (5) retaliation for rejecting unwanted sexual attention. The bill had bipartisan sponsorship and support, and it was approved in the House on February 7 and in the Senate on February 10. 

Unlike public court filings, one of the main characteristics of third-party arbitration is that the proceedings and the outcome are confidential. The new law amends the Federal Arbitration Act (FAA), which otherwise favors private arbitration of disputes, and creates an exception to forced arbitration of the covered claims. The law invalidates the involuntary forced arbitration of claims that arise after signing of an arbitration agreement, and includes a bar against any waivers of the right to bring sexual assault and/or harassment claims jointly or on a class basis. The enforceability of an arbitration provision, and any questions as to whether the legislation applies to a dispute, would be decided by a judge, not an arbitrator. Under the new law, a complainant can still voluntarily choose to proceed in arbitration rather than in state or federal court, but the choice is up to the complainant and must be made voluntarily after the claims arise.

The new law certainly applies to sexual assault and harassment claims, but there is language in the Act that suggests that other claims included in lawsuits alleging assault or harassment may be actionable exclusively in court as well at the complainant’s discretion. This new law states "no pre-dispute arbitration agreement or pre-dispute 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." This language no doubt will lead to extensive litigation as to the scope of the prohibition intended here. Courts may determine that the highlighted language means that all claims included in a dispute including allegations of sexual assault and/or harassment should proceed exclusively in court, or they could rule that some claims may be assigned to arbitration pursuant to a pre-dispute agreement while those expressly covered by the Act should proceed simultaneously in court. 

The new law provides that it "shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act." The language thus appears to apply to allegations of sexual assault or sexual harassment occurring after enactment. Even if an employer had valid arbitration agreements in place before the enactment of this law, it appears that claims or disputes that arise after the effective date of the law could not be subject to arbitration absent the plaintiff’s consent. 

The enactment of this law follows the choice of many organizations to drop mandatory arbitration agreements. Such agreements remain viable options for employers, having generally been supported by reviewing courts in recent years, but may not now be utilized to insist upon arbitration of claims involving alleged sexual assault and/or sexual harassment. Employers who wish to continue to utilize agreements providing for arbitration and/or joint-action waivers should consider revising their standard agreement to specifically carve-out and exclude claims of sexual assault and/or harassment.

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