Defining a Key Term for a Federal Act Aimed at Protecting Employees May Alter the Course of Legal Action

The “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” (the “Act”), enacted by Congress in 2022, states that when an individual alleges a sexual harassment or sexual assault “dispute,” no arbitration agreement that arose prior to the dispute is valid. Yet, the definition of the term “dispute” remained unclear for nearly two years until a California Court of Appeals clarified.

In Kadar v. Southern California Medical Center, Inc., the court concluded that “A dispute arises when one party asserts a right, claim, or demand, and the other side expresses disagreement or takes an adversarial posture.” The court also stated that a dispute may not arise solely from alleged sexual conduct, and determining the date of a dispute involves a fact-specific analysis.

Unlike a claim, which arises when a plaintiff suffers an injury, a dispute requires a disagreement or controversy. While the plaintiff in Kadar alleged that a colleague sexually assaulted him prior to signing a new arbitration agreement with the defendant employer, the court ruled that the claims did not amount to a dispute. Rather, the court found that evidence of a dispute in the case arose after the employee signed the arbitration agreement when the employer denied that the harassment occurred. Denial triggers the presence of a dispute.

The Kadar case may guide how other courts nationwide define the term dispute. It also raises the question as to whether employers should promptly deny sexual assault or harassment claims at the moment they’re made aware of them. Consult your legal counsel for further guidance on this issue.