It may be time to revisit arbitration clauses in your employment agreements

Blog Post

Many employers have provisions in standard employment agreements requiring employees to pursue legal claims related to their jobs, such as discrimination and harassment claims, using private arbitration instead of the public court system. Arbitration may be desirable for employers in such circumstances because it often permits quicker resolution of disputes, provides greater protections for confidentiality of the proceedings, limits appeals, and affords the parties greater flexibility with discovery and evidentiary procedures. Arbitration has also generally been favored by the courts as an efficient method of dispute resolution. Last week, however, in a rare showing of bi-partisanship, Congress passed legislation limiting the scope of mandatory arbitration for workplace sexual harassment and assault claims. President Joe Biden is expected to sign the bill into law in the coming days.

The new legislation, commonly known as the #MeToo Bill, prohibits employers from requiring mandatory arbitration of claims involving allegations of sexual harassment or sexual assault, even if employees have already assented to arbitration for workplace claims. The bill does allow an employee and employer to agree to arbitrate sexual harassment and sexual assault disputes if such agreement occurs after the dispute occurs and the employee agrees in writing. With pending implementation of the #MeToo Bill, employers should keep a few key issues in mind:

  • The effective date of the bill is fluid – The ban on mandatory arbitration will apply to all sexual harassment and assault “dispute[s] or claim[s] that arises on or after the date of enactment of [the] Act.” This means that employers should immediately begin modifying their approach to such claims to comply with the arbitration ban, or pay very close attention to the bill’s status. McDonald Hopkins is keeping close tabs on this and will provide updates as new information becomes available.
  • The bill’s language leaves room for interpretation – As drafted, the bill is ambiguous as to whether other claims by employees raised in conjunction with claims of sexual harassment or assault are also shielded from mandatory arbitration. This issue will likely need to make its way through the courts for interpretation.

The #MeToo Bill is a reminder to employers to regularly review their employment agreements and mandatory arbitration provisions  to ensure that they are compliant with applicable federal and state laws and are as effective as possible at protecting their organization. The McDonald Hopkins Labor and Employment Team is ready to help you with this and with any other issues or questions you have. Please do not hesitate to contact us.

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