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New forced arbitration law affects contracts of all kinds

On Behalf of | Mar 1, 2022 | Small Business |

Many businesses will be revising some of their standard contracts with the passage of a new law – one that brought together members of Congress who don’t agree on much of anything. The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 prohibits employers and others from requiring arbitration if they are named as defendants in legal claims of sexual harassment and assault.

The legislation, passed in both the House and Senate in February, is expected to be signed by President Biden when it reaches his desk. It grew out of the #MeToo movement, which brought to light the fact that many women did not go public about their assaults because they were required to sign an agreement in exchange for a settlement that prohibited them from talking about their experience publicly without risking substantial financial penalties. Other victims and witnesses were bound by non-disclosure agreements (NDAs) they’d signed earlier.

The law is intended to address the silence around sexual misconduct issues

That silence allowed serial abusers – most famously, former movie mogul Harvey Weinstein – to continue their behavior unchecked. It also allowed some businesses to bury cultures of harassment and abuse.

The law allows individuals to join a class-action suit if they choose, even if they have previously waived their right to participate in collective action. This, like other parts of the law, are retroactive. That means if an employee, customer or anyone else signed a contract requiring arbitration, they aren’t bound to it for sexual assault and other sexual misconduct allegations. It should be noted, however, that cases already decided through arbitration can’t automatically be relitigated because of this law.

As noted, this doesn’t just pertain to employment contracts. Everything from ridesharing apps to property leases to patient agreements contain clauses that require arbitration of all disputes. These clauses can now be voided if a plaintiff chooses to go to court over a sexual assault/harassment claim – no matter how long ago the agreement was signed.

No matter what kind of business you have, it’s crucial to be aware of this ground-breaking law, both in how it applies to your contracts that are already in place and to future contracts you’ll draft. Having experienced guidance can help you prevent costly and reputation-harming legal problems.