The Senate passed a significant bill on Thursday that effectively prevents employers, universities, and other institutions from immunizing themselves from lawsuits alleging sexual harassment or assault. The bill passed the House on Monday, and President Joe Biden is expected to sign it into law.
The bill, known as the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, targets “forced arbitration,” a practice championed by Republicans on the Supreme Court. Forced arbitration allows companies to shield themselves from lawsuits — and to shunt legal disputes into a privatized arbitration system that overwhelmingly favors corporate parties.
The new legislation provides that plaintiffs alleging sexual assault or sexual harassment may elect to have their dispute decided by a real court, even if they previously signed a forced arbitration agreement.
Employers, banks, nursing homes, and numerous other companies require their workers, customers, and patients to sign contracts containing a forced arbitration provision. Under these provisions, if a legal dispute arises between the company and its workers or consumers, the dispute will not be resolved in a real court. Instead, the case will be resolved by a private arbitrator — often one supplied by an arbitration provider that is chosen by the company that drafted the forced arbitration provision.
Data shows that corporate parties are far more likely to prevail before an arbiter, as compared to a court. And when non-corporate plaintiffs do prevail before an arbiter, they typically receive much less money than they would if their case had been litigated.
The Court’s Republicans often present forced arbitration cases as ordinary contract disputes. As Neil Gorsuch argued in one of his first decisions as a justice, workers and companies both signed forced arbitration agreements, so they should both be bound by them.
But non-corporate parties rarely have the choice not to sign such an agreement. Many companies refuse to do business with anyone who doesn’t submit to forced arbitration. And the Supreme Court’s decision in Epic Systems v. Lewis (2018) permits employers to order their employees to relinquish their right to sue the employer under pain of termination. The upshot of that decision is that employees can easily be forced into a situation where their options in a legal dispute are arbitration or nothing.
Interestingly, while the Supreme Court frequently splits along party lines in forced arbitration cases — with Republican justices cheerleading the practice and Democratic justices dissenting — the new bill passed both houses of Congress with bipartisan support. The bill passed the House by a lopsided 335-97 vote margin, with 113 Republicans joining all House Democrats. It passed the Senate in an unrecorded voice vote.
Forced arbitration exists largely due to highly dubious decisions by the Supreme Court
Congress passed the Federal Arbitration Act of 1925, in the words of the late Justice Ruth Bader Ginsburg, to allow “merchants with relatively equal bargaining power” to resolve disputes through private arbitration.
Arbitration is a benign and even potentially beneficial practice in disputes between parties with reasonably equal bargaining power — disputes between an employer and a labor union, for example, are commonly resolved through arbitration — because it can be quicker and less expensive than litigation. Merchants in specialized industries can also choose an arbitrator who is more familiar with their industry than most judges.
Starting in the 1980s, however, the Supreme Court started to read the Arbitration Act expansively to allow companies to require ordinary consumers and workers to submit to arbitration.
In recent decades, moreover, the Court frequently divided along party lines in cases involving arbitration. Often, the Court’s decisions expanding forced arbitration read the text of the Arbitration Act so implausibly that it’s questionable whether the justices in the majority were acting in good faith.
To give just a couple of examples, the Arbitration Act explicitly exempts “workers engaged in foreign or interstate commerce.” Yet in Circuit City v. Adams (2001), a 5-4 Supreme Court held that nearly all workers engaged in foreign or interstate commerce may be forced into arbitration.
The Arbitration Act is also completely silent on the subject of class actions — a form of dispute resolution where multiple plaintiffs with similar claims join together in a single lawsuit. But in AT&T v. Concepcion (2011), the Court voted along party lines to permit companies to insert a clause into arbitration contracts that also ban class actions.
These decisions are a windfall for corporate parties, and a significant blow to the rights of workers and consumers. A 2015 study of forced arbitration in the workplace, for example, found that workers are significantly less likely to prevail before an arbiter — as compared to a lawsuit heard by a real judge.
And when workers do prevail over their employer, they are typically awarded about a fifth as much money as a similarly situated worker whose case was heard by a court.
In any event, once Biden signs the new legislation into law, forced arbitration will no longer exist in cases alleging sexual harassment or assault.
The bill targets “predispute arbitration agreement[s],” so the parties to a sexual harassment suit may agree after a dispute arises to submit the case to an arbitrator. But companies will no longer be able to use blanket forced arbitration contracts to immunize themselves from lawsuits for sexual misconduct.
That’s an important victory for workers and consumers — though also a fairly limited one. The overwhelming majority of legal disputes do not involve sexual assault or harassment; in the federal courts, for example, sexual harassment suits are typically styled as civil rights suits, but civil rights litigation made up less than 10 percent of the federal judicial docket in 2020.
So the new law will help workers. But decisions like Circuit City and Concepcion will continue to govern the overwhelming majority of disputes.