The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, which amends the Federal Arbitration Act, became effective on March 3.

While the act appears to be simple and straightforward ― it permits employees who have previously agreed to arbitration to nevertheless bring sexual harassment and sexual assault disputes in court, including as class or collective actions ― it will be anything but simple and straightforward to apply. The act will also affect whether other claims brought together with these disputes will be litigated in court or arbitration, and the various approaches employers will take in structuring their arbitration programs.

What disputes are to be resolved in court under the act?

Under the clear language of the act, plaintiffs may litigate sexual harassment and assault claims in court, even if they agreed to arbitrate them before the dispute arose. The act provides that:

[N]o predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.

What is unclear is how the act will apply if a complaint asserts claims in addition to sexual harassment or assault.

For example, many court complaints assert claims of sexual harassment together with claims of sexual discrimination regarding compensation or discharge. If that occurs, under the plain wording of the act the sexual harassment claim will be litigated in court if that is where it is filed. But what about the compensation or termination discrimination claims?

The act defines sexual harassment dispute as "a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law." Plaintiffs seeking to litigate in court may assert that the entire case ― including the compensation and termination claims ― relates to a sexual harassment dispute, and is therefore be litigated in court.

Defendants seeking to arbitrate may assert that the discrimination claims are separate and distinct from the alleged harassment, do not relate to a sexual harassment dispute, and are therefore to be litigated in arbitration.

While defendants will likely rely upon the well-established case law favoring arbitration, plaintiffs will likely assert that those cases are trumped by the act.

Suffice it to say, the outcome is uncertain. And perhaps the result would be different if the sexual harassment claim is instead filed together with a claim of harassment based on disability, race, religion or age ― or with wage and hour claims.

While the outcome may be unclear, what is clear is that it is for a court to determine whether the act applies to a particular dispute. So courts, not arbitrators, will be deciding whether, based upon the act, a dispute is to be litigated in court or in arbitration.

This is so regardless of whether the arbitration agreement delegates gateway issues such as arbitrability to the arbitrator.

Another important issue that the act does not address is whether a case alleging a variety of claims stays in court if the sexual harassment or assault claims are dismissed.

Numerous cases address when a defendant waives the right to arbitrate by first litigating in court. Among the factors courts consider in addressing this issue is the timeliness of the defendant's motion to compel arbitration.

If, before answering a complaint, the defendant files a motion asserting that it fails to contain sufficient factual allegations to support a sexual harassment or an assault claim, and moves to compel arbitration of the other claims at the same time or promptly after the motion is granted, any waiver argument would appear to be weak.

But if sexual harassment and assault claims are dismissed on summary judgment after discovery is completed, will a motion to compel arbitration of the other claims be granted at that point? The case law is virtually certain to evolve to address these and related issues.

What options do employers have for structuring arbitration programs in light of the act?

While some employers no longer require the arbitration of sexual harassment and assault claims in response to the #MeToo movement or for related reasons, many arbitration agreements currently require the arbitration of all employment-related disputes.

While the act renders invalid and unenforceable predispute arbitration agreements and joint action waivers with respect to sexual assault and harassment disputes, it does not appear to require employers to amend their agreements in order for them to remain effective as to other disputes.

Accordingly, as to current employees who have agreed to arbitrate all employment-related claims, employers have various options. For example, employers may elect to:

• Amend their agreements to conform with the act;
•  Not amend their agreements and inform employees that they will not seek to enforce the agreements as to sexual harassment and assault claims; or
• Simply wait to address the issue until a claim affected by the act is raised.

As to new hires, it is advisable to modify agreements to conform with the act going forward.

Agreements may conform with the act by excluding sexual harassment and sexual assault disputes from arbitration altogether, or by making those disputes arbitrable at the election of the employee.

Employers may also wish to consider additional options ― for current employees with agreements or new hires ― that go beyond what the act provides.

For example, employers may elect to cease requiring employees to arbitrate other harassment claims, such as claims on the basis of disability, race, religion, age or membership in other protected groups.

Doing so may avoid creating an unintended appearance that the employer takes harassment on the basis of gender more seriously than other types of unlawful harassment.

Another option is to forego the arbitration of equal employment opportunity claims altogether, but require the arbitration of all other claims. This would avoid potentially litigating whether a sexual harassment claim brought together with a discharge claim — whether based on gender or other protected group membership — should proceed separately, with the former in court and the latter in arbitration.

An even more limited approach would be to mandate arbitration for only a specified set claims, such as wage and hour and Employee Retirement Income Security Act-qualified benefit plan claims.

At the risk of stating the obvious, in deciding whether to adopt these or other options, a key legal issue for employers to consider is the potential impact of class and collective action waivers upon managing litigation costs and related risks.

While the legal, employee relations, and diversity and inclusion implications of these and related decisions will vary by employer, they will nevertheless be important for many employers to evaluate.

Of course, there is a preliminary issue for employers: Should arbitration be required at all?

To be sure, many employers have answered and will continue to answer that question in the affirmative. That said, the pros, cons and decision points regarding mandatory employment arbitration are beyond scope of this article.

Reprinted with permission of Law360.