On March 3, President Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFA SASHA”) which amends the Federal Arbitration Act (“FAA”) to effectively ban employers from enforcing pre-dispute agreements that require employees to arbitrate sexual assault or harassment claims. Effective immediately, the law allows employees alleging sexual assault or harassment to elect, at their option, to invalidate any arbitration provision or joint/class action waiver with respect to such claims.
No preemption defense. While several states that previously passed similar legislation were subject to preemption under the Federal Arbitration Action, this new federal law is not subject to any preemption defense.
No retroactive application. Notably, the law does not apply retroactively to any claims that arose prior to its enactment.
Enforcement in court. If there is a dispute as to enforceability, the law mandates that the dispute be decided in court under federal law rather than before the arbitrator as required by some agreements. There is an open question whether that requirement provides federal court jurisdiction.
Could lead to challenges to arbitration of other claims. Of some concern—and an issue that will certainly be the subject of litigation—the law may encourage employees to try avoid arbitration entirely for other claims, such as wage and hour claims, by also asserting sexual harassment or assault claims.
Employers should evaluate existing arbitration agreements and consult with trusted employment counsel to make any necessary changes to arbitration agreements and ensure compliance with the new law.