Employers no longer can require arbitration of sexual harassment claims

The U.S. Court recently heard oral arguments involving an Iowa fast-food worker who claims that employers have no right to force arbitration on employees after first contesting the lawsuit in pretrial proceedings.

In addition, on March 2 of this year President Biden signed a new law called the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, or EFASASHA, barring the use of forced arbitration to address sexual assault and harassment claims in the workplace.

The law has been referred to as the “#MeToo law” in reference to the #MeToo movement that exposed the prevalence of employment contracts that included arbitration agreements requiring workplace sexual harassment and assault claims to be resolved through arbitration and kept out of court.

Arbitration is a private out-of-court way of resolving disputes. Many employers prefer arbitration over a jury trial because it is perceived as more streamlined and less public.

The new law guarantees alleged victims of workplace sexual harassment and assault have the ability to pursue a lawsuit in court as opposed arbitration. The Act will apply to any dispute or claim that arises or occurs on or after the law’s enactment, or March 3, 2022.

The scope is limited to claims of sexual assault and sexual harassment and does not apply to other claims of alleged discrimination for race, age, religion or retaliation, for example.

The new law also does not ban arbitration outright for sexual harassment or assault allegations, but allows employees to opt out if that is their preference. The employee’s decision whether to arbitrate or proceed to court ultimately will control what happens.

In light of the recent Supreme Court case involving the Iowa employee — and other arbitration cases that are pending before the court — and this new law, employers that have arbitration agreements with their employees need to be constantly surveying the legal landscape.

If you still use arbitration agreements with your employees, make sure you tell your attorney about the signed arbitration agreement at the first sign of litigation. Do not wait!

Also, talk with your attorney about removing any language mandating arbitration of workplace sexual harassment also claims and revise the agreements accordingly.

If you are worried about “runaway” jury verdicts, employers also are encouraged to consider alternatives to arbitration, and now is a good time to think about revising your employment agreements with employees to include a jury trial waiver.

Jury waivers offer an important protection against runaway emotional distress — and emotional — verdicts. Several Iowa federal court judges have approved these waivers.

Bench trials tend to result in better guidance to the parties about their case and the logic behind the decision because in an action tried without a jury the court must find the facts specially and state its conclusions of law separately.

By contrast, in jury trials both sides are frequently left wondering why the jury ruled the way it did, and the attorneys — only if the court permits them — often are left to contact each juror to find out the logic for their ruling.

EFASASHA’s passage may usher in a new or renewed era of the #MeToo movement, and employers should redouble their efforts to provide enhanced anti- harassment training, regularly communicate the importance of compliance, ensure a process to promptly investigate credible allegations and timely address instances of harassment that may arise.

Wilford H. Stone is lawyer with Lynch Dallas in Cedar Rapids.