FAA amendments will have effect on CA law on arbitration of sexual assault, harassment claims

At least three times this decade, the California Legislature attempted to put limits on predispute agreements to arbitrate sexual harassment, discrimination, or other types of employment disputes. Every time bills were sent to him, then Governor Jerry Brown vetoed them, calling the provisions illegal under the Federal Arbitration Act (FAA). The FAA preempts and nullifies any state law contrary to its broad pro-arbitration policies.

No more. The U.S. Senate and House of Representatives recently passed and President Joe Biden signed a bipartisan amendment to the FAA, coauthored by the strangest of bedfellows: Senators Kristen Gillibrand (D-New York) and Lindsay Graham (R-South Carolina). For claims that arise or accrue on or after March 3, 2020, the law prohibits enforcement of mandatory arbitration agreements or class action waivers in cases alleging sexual assault or sexual harassment.

The law defines a “sexual assault dispute” as “involving a nonconsensual sexual act or sexual contact . . . including when the victim lacks capacity to consent” and a “sexual harassment dispute” as a “dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”

The law makes unenforceable all predispute arbitration and class action waivers in cases alleging sexual harassment or sexual assault. Any disagreement regarding the dispute’s enforceability under the FAA is decided by a court applying Federal law, not by the arbitrator.

Ramifications for California