California Court Expands Tools to Void Arbitration Agreements: 3 Steps Employers Can Take Now | Fisher Philips

A California appeals court recently ruled that a federal law that bars employers from requiring sexual harassment claims to be arbitrated also blocks the arbitration of all other claims brought as part of the same case. While this is not the first court in the country to interpret the Ending Forced Arbitration of Sexual Assault and Sexual Harasment Act (EFAA) in this manner, this decision gives California workers a new tool to avoid arbitration for all claims brought in a sexual harassment case. . Employers across the country should also take note, as this issue will likely continue to be litigated across the country. We explain what employers need to know and give you three steps you can consider taking next.

What is the EFAA?

The EFAA, which was signed into law by President Biden in 2022, prohibits “forced” arbitration in sexual assault and sexual harassment disputes, which the law defines as follows:

• Sexual Harassment Dispute: “a dispute involving conduct alleged to constitute sexual harassment under applicable federal, tribal, or state law.”
• Sexual violence dispute: “a dispute involving a sexual act or sexual contact without mutual consent.”

Specifically, the EFAA (at the option of the person alleging the relevant conduct) renders pre-dispute arbitration agreements void and unenforceable with respect to a “matter” involving a sexual assault or sexual harassment dispute that:

• arises or arises on or after March 3, 2022; And
• is filed under state, federal, or tribal law.

For a detailed overview of the law, please read our extensive frequently asked questions here.

The California Court of Appeals rules on the scope of the EFAA

A California appeals court recently ruled that when a plaintiff files a claim for sexual harassment or sexual assault, the whole thing is exempt from arbitration under the EFAA. Here’s what you need to know Doe v. Second Street Corp.

What happened?

Last year, someone sued a Santa Monica hotel where she had previously worked as a waitress. At the heart of the lawsuit were claims of sexual harassment and constructive dismissal, based on the way hotel management allegedly treated her — until her employment ended in May 2022 — after she reported to her supervisor in 2019 that she had been assaulted and sexually assaulted outside . of a colleague’s work. The lawsuit also alleged a variety of wage and hour violations.

The hotel argued that all of its claims should be subject to mandatory arbitration (based on provisions it reportedly agreed to in 2016) because the claims accrued and “the core of the wrongful conduct occurred prior to March 3, 2022.” The hotel further argued that even if EFAA were to render these provisions unenforceable with respect to the sexual harassment claims, the other claims (such as those involving wage and hour violations) should be submitted to arbitration.

How did the Court rule?

A California Court of Appeals ruled on September 30 that the EFAA made the employer’s arbitration provision unenforceable as to all of the plaintiff’s claims.

• The court found that the plaintiff’s sexual harassment claims arose after the effective date of the EFAA, stating that “a sexual harassment claim alleging a continuing violation “expires” on the date of the last act constituting such violationeven if action could have been taken against the behavior sooner.”
• The court further ruled that The plaintiff’s other lawsuits (such as the wage and hour claims) were also exempt from mandatory arbitration because they were part of the same “case.” – by adopting the analysis formulated by a New York federal judge in 2023. The court noted that EFAA “does not require that the pending claims emerged from the dispute about sexual violence or sexual harassment; it is enough that this is the case relates to the claims of sexual abuse or sexual harassment.” The court concluded that the plaintiff’s entire case was related to the sexual harassment dispute “because all the causes of action are asserted by the same plaintiff, against the same defendants, and arise out of the plaintiff’s employment at the hotel.”

As a result, all of the plaintiff’s claims were exempt from mandatory arbitration under the EFAA.

The Most Important Things for California Employers + 3 Steps You Can Take Now

Following this decision, plaintiffs pursuing a sexual harassment claim will likely be able to avoid arbitration all claims filed in the same lawsuit. And this applies even if the “crux” of the sexual harassment claim occurred before the effective date of the EFAA – as long as the “last act” of the alleged wrongful conduct occurred on or after March 3, 2022.

This poses significant challenges for employers, who often rely on mandatory arbitration agreements to streamline dispute resolution and minimize litigation costs related to wage and hour claims. So you should take these three action points into account:

1. Continue to take steps to prevent and minimize disputes. You must ensure that your harassment, assault and reporting policies comply with this. You must also provide training to managers and employees regarding harassment, assault, and company policy on the matter. Finally, you should take steps to minimize wage and hour violations. These could end up in court if someone also makes claims of sexual harassment or assault.
2. Check your arbitration agreements to ensure exceptions are sufficient following these decisions. For example, arbitration agreements that include only sexual harassment and sexual assault claims may be deemed unconscionable following this decision. Work with your advisor to determine the best approach for your arbitration agreements.
3. Stay informed of developments. The applicability and scope of the EFAA continues to be litigated across the country, including whether the EFAA applies to the “entire case” when a plaintiff brings both individual claims (including sexual harassment) and class action claims submits. Although a California court has not yet ruled conclusively on this issue, a federal court in New York has ruled that it has not and sent representative wage and hour claims to arbitration on behalf of the employer’s non-exempt employees.