Three Years of the Ending Forced Arbitration Act: Where Things Stand

Three Years of the Ending Forced Arbitration Act: Where Things Stand

In 2022, Congress enacted the Ending Forced Arbitration Act (EFAA), which prohibits using an arbitration agreement that was signed before a dispute arose to force arbitration of a claim for sexual assault or sexual harassment. This was a victory for employees whose sexual assault and sexual harassment claims have often been shunted into secret proceedings, though the legislation did not go far enough in prohibiting forced arbitration of other types of serious claims. Employers require workers to sign arbitration agreements for a number of reasons, but the effect is largely the same: the secrecy of arbitration prevents the public from learning about major misdeeds by companies whose goods and services we all use, and other workers may never know that they are not alone. When a worker is harmed by their employer and cannot seek justice in court, the worker and society are deprived of transparency and fairness. We have addressed a variety of issues related to mandatory arbitration for employees, for example, here, here, here, and here.

The EFFA became effective when it was enacted, March 3, 2022, a date that has been the focus of much litigation. Three years after the EFFA, victims of sexual assault and sexual harassment have successfully invoked it to keep their claims out of arbitration, but courts have dealt with the EFFA’s applicability in different ways and with interesting results.

The Sixth Circuit recently delivered an opinion that favors applicability of the EFFA in Memmer v. United Wholesale Mortgage, LLC, 2025 WL 1144771. In that case, the plaintiff worked as a mortgage underwriter from September 30, 2019 to July 9, 2021—almost eight months before the effective date of the EFFA. The plaintiff alleged that a co-worker sexually harassed her, and that she suffered disability discrimination, while employed at United Wholesale Mortgage. She filed suit under Title VII, the Americans with Disabilities Act, the Fair Labor Standards Act, and Michigan anti-discrimination laws. The district court found that the plaintiff signed a valid arbitration agreement, and did not address the plaintiff’s argument that the EFAA applied to her claims.

On appeal, the Sixth Circuit reversed, finding that though the plaintiff’s employment ended in July 2021 (before the enactment of EFAA), the EFAA expressly applies to claims that accrue and disputes that arise after its March 3, 2022 effective date. Without finding whether the plaintiff’s dispute arose after the effective date, the appellate court observed that the plaintiff filed her charge of discrimination with the U.S. Equal Employment Opportunity Commission on April 26, 2022, and her lawsuit on April 19, 2023, and that a “dispute” generally “denotes a controversy between parties,” which “could arise when an injured party sends the defendant a demand letter, files an administrative charge, requests arbitration, commences a lawsuit, or some other event occurs.” The Sixth Circuit remanded the case for the district court to determine when the dispute arose. In so finding, the Sixth Circuit joined the Third and Eighth Circuits.

Indeed, in Famuyide v. Chipotle Mexican Grill, Inc., 111 F.4th 895 (8th Cir. 2024) the Eighth Circuit affirmed a district court finding that a plaintiff who was sexually assaulted in November 2021, and whose counsel sent pre-litigation letters to the defendant mentioning the possibility of filing civil suit before the effective date of the EFAA, was entitled to the EFAA’s protection because her dispute that arose after the effective date. (Id. at 898.) The Eighth Circuit found that though the plaintiff’s lawyers contacted the defendant before the effective date, the “lawyers did not assert that Chipotle violated [the plaintiff’s] rights, and they did not demand compensation or payment from the company. There was thus no conflict or controversy between the parties, and no ‘dispute’ that could have been submitted to arbitration.” (Id.) (Note that at the time of this writing, the defendant may still petition the U.S. Supreme Court for certiorari.)

Cases about whether claims and disputes fall within the EFAA based on its effective date will presumably diminish going forward, as new claims and disputes arise. But these cases reveal how ardently employers seek to enforce arbitration agreements to keep these claims out of court.

Another developing body of law regarding the applicability of the EFAA examines whether, when a plaintiff alleges sexual assault or sexual harassment, she needs to state sufficient facts to support a cognizable harassment claim—that is, whether the allegations could survive a motion to dismiss or demurrer for failure to state a claim in order to gain EFAA protection. One court, the U.S. District Court for the Southern District of New York, answered that question in the affirmative in Yost v. Everyrealm, 657 F.Supp.3d 563 (S.D.N.Y. 2023), and then “part[ed] from the holding of Yost” in Diaz-Roa v. Hermes Law, P.C., 757 F.Supp.3d 498, 533 (2024) and “conclude[d] that the view that is more faithful to Congress’ language and intent is that a plaintiff need only plead nonfrivolous claims relating to sexual assault or to conduct alleged to constitute sexual harassment, with the sufficiency of those claims to be reserved for proper merits adjudication.” This analysis is more favorable to plaintiffs, because it would mean that courts may not evaluate the merits of plaintiffs’ claims to resolve motions to compel—instead, “the sufficiency of those claims to be reserved for proper merits adjudication, be it a motion to dismiss, motion for judgment on the pleadings, motion for summary judgment, or trial.” Diaz-Roa at 533. Courts that follow Yost appear to agree with its reasoning that applying EFAA without evaluating whether a plaintiff stated a claim “would enable a plaintiff to evade a binding arbitration agreement—as to wholly distinct claims, and for the life of a litigation—by the expedient of adding facially unsustainable and quickly dismissed claims of sexual harassment.” Yost at 586. Observers of the EFAA should anticipate continuing litigation over whether the EFAA mandates a particular pleading standard for plaintiffs with sexual assault or sexual harassment claims to stay in court.

Finally, courts have not resolved whether a plaintiff who alleges sexual assault or sexual harassment claims alongside other claims may be compelled to arbitration on the other claims. That said, the majority of courts appear to rely on the language of the EFAA to hold that a plaintiff’s non-sexual harassment (or assault) claims cannot be compelled to arbitration where they are part of the same case a claim for sexual harassment or sexual assault. The Southern District of New York, in a case against Everyrealm, like Yost, found that a plaintiff who alleged race discrimination, pay discrimination, whistleblower retaliation, and sexual harassment was entitled to the application of EFAA to his claims. Johnson v. Everyrealm, 657 F.Supp.3d 535 (S.D.N.Y. 2023.) That court relied on 9 U.S.C. § 402(a), which provides that:

no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.

(Emphasis added.) The Johnson court observed that

With the ordinary meaning of “case” in mind, the text of § 402(a) makes clear that its invalidation of an arbitration agreement extends to the entirety of the case relating to the sexual harassment dispute, not merely the discrete claims in that case that themselves either allege such harassment or relate to a sexual harassment dispute (for example, a claim of unlawful retaliation for a report of sexual harassment). If further confirmation of that understanding were needed, a surrounding EFAA provision—the one that sets the EFAA’s effective date—uses the narrower term “claim.”

Id., 559. At least one California court has followed this reasoning, in Liu v. Miniso Depot CA, Inc., holding that a plaintiff who alleged sexual harassment, wage-and-hour violations, sexual orientation and gender identity discrimination, and retaliation for reporting unlawful activities was entitled to application of the EFAA. 105 Cal.App.5th 791 (2024).

These cases underscore the usefulness of the EFAA to employee victims of sexual assault or sexual harassment, who can seek relief for a range of unlawful harms in court without being forced to litigate in multiple forums to vindicate their claims.

The EFAA is still new legislation, and all of its effects are not yet known. So far, though, the EFAA has proved a useful tool for workers who want to hold their employers accountable for sexual assault and sexual harassment.

If you have experienced sexual assault or sexual harassment in the workplace, please contact us at Bryan Schwartz Law, P.C.