Senate Ends Forced Arbitration For Sexual Misconduct

Last week, with momentum from the #MeToo movement, the senate took a big step, passing the  “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Bill” which will put an end to the controversial practice of mandating arbitration for victims of sexual misconduct. Expected to be signed into law shortly by President Biden, the bill will effectively allow victims to override any employer forced arbitration clauses allowing them to pursue individual or class action lawsuits against their accused perpetrators. It will also do so retroactively, nullifying any existing agreements.

As a result of the bill, there is a greater potential for larger settlements against employers. This is particularly true given the increased exposure to class action claims. In combination with the rise of such claims in #MeToo era, corporations should carefully assess their EPLI insurance policies, both for its terms & conditions, and limit adequacy. This bill may also further fuel event driven litigation as organizations will no longer be able to veil allegations or wrongdoing. Given the potential increased exposure to securities class actions and/or derivative lawsuits, organizations should also assess their D&O insurance policies for limit adequacy and the scope of coverage related to derivative actions, while implementing a robust layer of Side A DIC coverage. This is particularly true for companies operating in high risk sectors which would include the food & hospitality, tech/finance, manufacturing, retail and healthcare sectors.

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