Signed into law by President Joe Biden in March 2022, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 amended the Federal Arbitration Act (FAA) to effectively ban the pre-dispute arbitration of sexual harassment and sexual assault claims. Although this important legislative update has often been framed within the employment context, it is important for all employers, including those in the healthcare industry, to note that the sweeping ban on sexual assault and sexual harassment arbitration agreements does not appear to be limited to claims arising solely within the workplace.

The new law’s broad definition of the term “pre-dispute arbitration agreement” as “any agreement to arbitrate a dispute that had not yet arisen at the time of the making of the agreement” does not explicitly exclude agreements outside of employment agreements. Additionally, the law’s definitions of the terms “sexual assault dispute” and “sexual harassment dispute” do not explicitly limit conceivable claims to the workplace.

Importantly, many states have civil statutory frameworks outlawing sexual harassment/assault that provide for a cause of action for sexual harassment/sexual assault outside of the employment context (such as the public accommodation provisions in the New Jersey Law Against Discrimination – NJLAD). Employers should therefore closely consider how the new law might also affect arbitration agreements with customers, clients, and/or patients that limit premises liability.  Insurance rates could also be impacted, as the cost of defending these claims in state court are often much higher than through arbitration.

Since the passage of the first amendment to the FAA, the House has passed a second bill amending the FAA that would extend the ban on pre-dispute arbitration agreements to future employment, consumer, antitrust, and civil rights claims. Notably, this second proposed amendment defines “employment” and “civil rights” claims broadly enough to include the full panoply of federal and state employment discrimination/civil rights claims, and explicitly includes claims arising from alleged discrimination in – among other places – “public accommodations and facilities” and “healthcare.”

Although the first FAA amendment passed mostly along party lines with limited bipartisan support, the pending second amendment is expected to garner far more contention and debate in the Senate along the usual party lines. As of now, it appears that the second amendment may narrowly pass in the Senate if Democrats can maintain their partisan coalition that led to passage of the first amendment. However, this outcome assumes that the vote takes place before the mid-term elections in November 2022, which remains uncertain. Regardless, the recent changes to the FAA and the potential future changes should be closely reviewed by healthcare providers.