In 2017, the #MeToo movement highlighted the magnitude of issues associated with workplace sexual harassment, including perpetrators requiring private arbitration of sexual harassment claims to avoid notoriety and minimize the consequences of their behavior. In response, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA) of 2021, which took effect on March 3, 2022, and primarily doesn’t allow employers to enforce arbitration agreements if the claim involves sexual harassment.
Recently, two California Court of Appeal cases presented the same issue — if a lawsuit contains not only a sexual harassment claim but also additional claims such as wage and hour violations, does the EFAA prevent mandatory arbitration of all claims? In both cases, the court held that the entire lawsuit should not be moved to arbitration if it has at least one qualifying sexual harassment claim (Doe v. Second Street Corp., No. B330281 (Sept. 30, 2024) and Liu v. Miniso Depot CA, Inc., No. B338090 (Oct. 7, 2024)).
What Happened in Doe
In Doe, the plaintiff worked as a server for a restaurant in a hotel from 2016 to 2022. When hired, Doe acknowledged receipt of the hotel’s handbook, which included a mandatory arbitration agreement within it.
In October 2019, a coworker, Ryan Jackson, attacked and sexually assaulted Doe outside of work. Doe reported the assault to her supervisor and asked not to be scheduled with Jackson again; however, on occasion, Doe and Jackson’s shifts would still overlap after Doe’s report.
Then, in October 2021, a new food and beverage supervisor, Eman Rivani, became responsible for employee scheduling. During orientation, Rivani was informed not to schedule Doe and Jackson together unless absolutely necessary. Despite the instruction, Rivani asked Doe about details of her assault, and Doe provided them with some difficulty. Rivani determined the assault was Doe’s fault and scheduled Doe and Jackson together the next day. After this, Doe and Jackson were regularly scheduled together causing Doe significant emotional distress, which manifested into vomiting before shifts and suicidal ideations.
By May 2022, Doe suffered panic attacks and, following her most recent panic attack, informed her medical provider that she was suicidal. Doe was placed on an involuntary psychiatric hold and after May 10, did not return to work on her doctor’s advice. She filed suit against her former employer alleging 11 causes of action including sexual harassment and several wage and hour violations. The hotel sought to enforce the handbook arbitration agreement and argued the EFAA didn’t apply because much of the sexual harassment conduct occurred before the EFAA took effect in March 2022. Because Doe alleged an ongoing hostile work environment after the EFAA’s effective date — and the EFAA applies to entire cases that involved sexual harassment, not just the individual claims — the trial court declined to enforce the arbitration agreement. The hotel appealed.
What Happened in Liu
In the other California Court of Appeal case, in April 2021, Yongtong Liu was hired by Miniso Depot CA, Inc. (“Miniso”) as a human resources administrator and signed an arbitration agreement when she received the job offer. Initially, Liu worked as an hourly, nonexempt employee, but in January 2022, her title changed, and she became a salaried, exempt employee although her duties remained the same.
Liu identified as a lesbian and dressed in a “unisex non-gender specific style.” She alleged that her appearance received comments from her supervisors and others, including comments that she is unattractive because she is “too skinny” and that if she ate more, she would “have more curves.” Liu was also present for other general negative comments made about homosexuals being “creepy” and that women at Miniso were “little girls” as well as other gender-role stereotypes about men and women.
Lastly, Liu alleged Miniso management required her to engage in illegal practices, like paying women less than men solely based on their sex, to hire only applicants that were young and Korean, and to falsify immigration documents. Liu complained about these practices and alleged that she experienced increased harassment and discrimination following her complaints. By June 2023, Liu resigned claiming that Miniso constructively terminated her based on her sex and sexual orientation/gender identity as well as in retaliation for her whistleblowing activities.
Liu brought suit for these and other causes of action including several wage and hour violations related to her misclassification as an exempt employee. Miniso attempted to enforce the arbitration agreement that Liu signed but the trial court, as it did in Doe, declined to enforce the agreement due to the EFAA. Miniso appealed.
Court of Appeal Decisions
The two California Court of Appeal divisions were primarily tasked with determining whether the EFAA authorized a complete ban on mandatory arbitration when the case involved not only a sexual harassment claim but also several other different claims like wage and hour violations or whistleblower retaliation. Both divisions came to the same conclusion — the EFAA’s plain language exempts the plaintiff’s entire case from arbitration, not just the individual claim. Specifically, the EFAA section 402(a) states that “no valid predispute arbitration agreement…shall be valid or enforceable with respect to a case which is filed under…[s]tate law and relates to…the sexual harassment dispute.”
Based upon this language, both divisions found that the plain meaning of the word “case” signified an entire lawsuit — not just a single sexual harassment claim within a larger case. As a result, neither the hotel nor Miniso may enforce their arbitration agreements with Doe and Liu.
These cases highlight an even greater need for employers to work diligently to avoid workplace sexual harassment complaints now that they may undermine an employer’s entire pre-dispute arbitration agreement. Employers are encouraged to take all complaints of sexual harassment and assault seriously and, when it is determined that an employee may have experienced sexual harassment, take reasonably prudent proactive steps to prevent workplace harassment, such as appropriate discipline up to, and including, termination of the offending employee.
Lastly, it’s more important than ever to have effective employee and supervisor training to help recognize modern-day harassing conduct and the appropriate steps supervisors may take to help prevent it.
Matthew J. Roberts, Associate General Counsel, Labor and Employment
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