By Kristin Leaptrott.
On March 3, 2022, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFASA”). This law represents a significant “win” for the MeToo movement as it prohibits employers from enforcing mandatory arbitration agreements against employees bringing claims against their employers for sexual harassment or sexual assault in the workplace.
Me Too is a social movement that supports sexual assault survivors and sheds light on the prevalence of sexual harassment and sexual assault. Activist Tarana Burke started the Me Too movement in 2006, but Me Too reached a global audience in 2017 when celebrities like Alyssa Milano started using the hashtag #MeToo on social media to talk about their experiences with sexual assault in the entertainment industry.
The Me Too movement has highlighted many of the problems women face in combating sexual assault and sexual harassment by men in positions of power. One of the targets of the Me Too movement has been the use of mandatory arbitration in sexual assault and harassment cases, because it effectively silences sexual assault and harassment victims and prevents them from speaking out against their abusers.
With the passage of the EFASA, employers can no longer enforce mandatory arbitration agreements against sexual assault and harassment victims. Informally called the #MeToo Bill, the EFASA applies to all claims of sexual harassment or assault that accrue after the bill was passed, regardless of when the applicable mandatory arbitration agreement was signed. This means that employees now have the right and the choice to sue their employers in court for sexual harassment or abuse, as opposed to pursuing the claim in arbitration.
What is Arbitration?
Arbitration is a method of alternative dispute resolution in which disputing parties agree that one or several individuals can make a decision about the dispute after receiving evidence and hearing arguments. It involves the selection of at least one neutral third-party, called an arbitrator, who acts in the place of a judge to make a determination on a dispute between two parties. Arbitration can be less formal, less costly, and less time-consuming than formal litigation. Additionally, unlike litigation, arbitration is not a public proceeding, and the arbitrator is not limited to ordering the relief that would be available to the parties in a court of law. For these reasons, arbitration provides a legitimate alternative to litigation that some people choose to pursue rather than having their disputes heard in court.
There are, however, some drawbacks to choosing arbitration over litigation. An arbitrator’s decision is generally binding on the parties, but is not appealable in court as a judge’s decision would be following a trial. Depending on how the arbitrator is selected, he or she may be biased toward one of the parties. This bias makes the finality of the arbitrator’s decision especially troubling. Additionally, although arbitration has the potential to be less costly than formal litigation, the cost can still be significant if the parties are represented and if they choose to engage in formal discovery procedures.
Employers are permitted by federal law to require employees to agree in advance to arbitrate a wide variety of issues related to the employment. This deprives employees of their ability to choose to have any employment disputes heard in court long before a dispute arises. But it has not always been that way.
Congress passed the Federal Arbitration Act (“FAA”) in 1925 “to expedite the resolution of contract disputes between companies of equal bargaining power.” The FAA was originally intended to apply to commercial disputes. Section 1 of the FAA states that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
For many years the Supreme Court rejected attempts by employers to expand the FAA to cover employment contracts. However, the Court reversed course in its 2001 decision in Circuit City Stores, Inc. v. Adams, when it held that the exemption for “contracts of employment” in Section 1 applied only to employment contracts of transportation workers. Since then, the use of mandatory arbitration agreements in employment contracts has grown substantially. It is estimated that over 55% of American workers are subject to mandatory arbitration agreements. Forced arbitration agreements are popular among employers because arbitration is confidential, giving employers the ability to shield problematic employment practices from their employees and the public.
Forced employment arbitration is no stranger to criticism. Some argue that it is unfair to workers because employment contracts are offered on a “take it or leave it” basis, meaning that employees are required to sign arbitration agreements as a condition of their employment. Forced arbitration is also decidedly employer-friendly. A study on employment arbitration cases from 2003–2007 found that the “employee win rate” in arbitration was 21.4%, compared to a win rate of 36.4% in federal court. The same study found that the median award amount in arbitration cases was $36,500, compared to $176,426 in federal court.
The EFASA – Finding Common Ground
The EFASA represents a narrow bipartisan compromise on the larger issue of forced employment arbitration. Democrats in Congress have made several attempts to end all mandatory employment arbitration through various bills like the Forced Arbitration Injustice Repeat Act (The “FAIR” Act) and the Restoring Justice for Workers Act. Those bills have thus far failed because they have not garnered enough Republican support. Nonetheless, President Biden has signaled interest in working with Congress on future legislation further limiting the scope of mandatory arbitration agreements, and the EFASA may have created the needed momentum in Congress to end forced arbitration on a broader scale. For now, victims of workplace sexual harassment have one thing to say:
See you in court.