On February 10, 2022, the House passed legislation precluding the use of arbitration clauses in employment cases involving sexual harassment claims. This legislation, sponsored by Lindsey Graham and pushed by Gretchen Carlson, was signed into law by President Biden.
So what does this mean for you? After the effective date, employers will no longer be allowed to impose arbitration provisions contained in their employment agreements. Especially for high-level employees, many employers require employee disputes to be resolved through arbitration rather than being litigated through state or federal courts. By compelling arbitration, employers can resolve the dispute in private without the public’s awareness of the employee’s claims. This practice has been a huge contributor to allowing the harasser to remain in their position without any negative recourse while the company quietly settled the claims. While a complaint filed in state or federal court can be found by doing a simple Google search or searching the court’s public docket by the employer or employer’s name, arbitration filings are private and not searchable. Typically, a complaint, motion documents, briefs, etc. contain a lot of information regarding the employee’s fact pattern, which in arbitration, remain out of the public light. Hence, the rampant use of arbitration clauses by employers in their contracts.
“The Weinsteins, the Cosbys, the Roger Ailes and the Bill O’ Reillys of the world used mandatory arbitration to force women into secrecy,” said Nancy Erika Smith, an employment lawyer who represented Gretchen Carlson, the former Fox News host, in her landmark sexual harassment case against Mr. Ailes, the former chief executive of Fox News. “They stayed in positions of power and continued to abuse women.” (https://www.nytimes.com/2022/02/07/us/politics/house-bill-forced-arbitration.html)
The bottom line: This new law will preclude the enforcement of arbitration clauses for claims arising after the law becomes effective. It will apply to sexual harassment cases filed in federal, state, or tribal courts. Once it is unlawful to require forced arbitration of sexual harassment/discrimination employment disputes, companies will have a harder time hiding behind the shroud of secrecy provided by arbitration venues.