A bipartisan bill introduced in Congress this week seeks to make it illegal for employers to enforce mandatory, pre-dispute arbitration agreements with employees alleging workplace sexual harassment or other sex-based discrimination claims falling under Title VII of the Civil Rights Act of 1964. Given the current political climate surrounding sexual harassment, the proposed bill has gained significant media attention and seems likely to garner wide congressional support. Sens. Kirsten Gillibrand (D-NY) and Lindsey Graham (R-SC) are leading the charge on The Ending Forced Arbitration of Sexual Harassment Act of 2017.
This bill would affect employers who require employees to agree to arbitration of employment disputes. If passed, the law would make arbitration provisions falling within the broad reach of the Federal Arbitration Act (FAA), including class action waivers, unenforceable as to employee sexual harassment and other sex discrimination claims. Because of the very broad reach of the FAA, which governs all arbitration agreements involving interstate commerce in both state and federal court, this law would invalidate such arbitration provisions.
While its title and legislators’ comments to the media express an intent to target mandatory arbitration of only sex discrimination claims, the text of the initial legislation appears to go further. Proposed as an amendment to the FAA, the House version of the bill (the Senate version had not been published as of this writing) includes a technical amendment that, on its face, may strip all employment contract claims – not just those involving sexual harassment or discrimination – from the purview of the FAA.
While this may be a drafting error that will be corrected during the legislative process, the potential impact of this amendment for employers is significant. Regardless of what form the final legislation takes, employers will need to be aware of the impact this potential law may have on the enforceability of class action waivers and arbitration clauses in their employment agreements, particularly as they pertain to sex discrimination and harassment claims.