On February 24, 2023 the United States District Court for the Southern District of New York held that a former employee’s arbitration agreement with his former employer was unenforceable under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”) because the former employee’s amended lawsuit included plausible sexual harassment claims.  According to the court, the EFAA bars arbitration of the entire case, including the claims of race discrimination, if a plausible harassment claim is included.

The Court reasoned that the EFAA’s statutory language — referring to a “case” and not a “cause of action” — is clear evidence that Congress intended the EFAA to render the arbitration agreement unenforceable to the entire case, and not just the employee’s sexual harassment claim.  The Court also reasoned that the EFAA was passed as an amendment to the Federal Arbitration Act (“FAA”), showing Congress intended to override the FAA’s provisions permitting non-sexual harassment claims to proceed to arbitration. 

However, the Court also held in another case that sexual harassment allegations must satisfy federal pleading rules and set forth a viable or plausible claim in order for the EFAA to be triggered and render the entire arbitration agreement unenforceable.  In that case, the Court held that the former employee’s allegations of sexual harassment were “threadbare” and “conclusory”, and ultimately enforced the arbitration agreement. 

While the decisions are only persuasive within the Second Circuit and other circuits, we expect that plaintiffs will argue the decisions should be followed in the Second Circuit and in other circuits.  Ultimately, the Supreme Court is likely to issue a decision interpreting the EFAA in the future.  Ballard Spahr’s Labor and Employment Group frequently advises employers on drafting and enforcing arbitration agreements.