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Article by Luiza Manuelian

ARBITRATIONS ARE GOING TO BE DIFFICULT TO ENFORCE IN CALIFORNIA COURTS FOR CASES THAT INVOLVE BOTH SEXUAL HARASSMENT AND OTHER CLAIMS

What was practiced by trial courts is now confirmed by the California Court of Appeals in its two recent decisions: if a Plaintiff alleges wage/hour claims or any FEHA (Fair Employment Housing Act) claim and sexual harassment in their complaint, they can defeat a motion to compel arbitration for ALL claims. Get ready to see more sexual harassment claims added to wage/hour cases.

In the two recent cases, California Court of Appeals expanded its definition of “claims” to include “case” so that if a complaint alleges sexual harassment as one of its causes of action, the entire case is excluded from arbitration.

In Doe v. Second Street Corp., the plaintiff filed a lawsuit against her former employer for being sexually assaulted by a co-worker and was ignored of her complaints by her supervisors. She claimed that despite her complaints, her supervisor scheduled her to work in the same shift as the co-worker that assaulted her. Plaintiff brought 11 claims, three relating to the alleged sexual harassment, six for wage/hour violations, and two for slander and libel. The employer filed a motion to compel arbitration of the entire case, which the trial court denied. The trial court held that all of plaintiff’s claims were subject to the EFAA (Ending Forced Arbitration of Sexual Harassment Act, which was passed by Congress in 2022, excluding sexual harassment claims from mandatory arbitration provisions). The Court reasoned that the statute invalidates an arbitration clause as to the entire case, not just the sexual harassment claim. Therefore, the court in Doe held that the arbitration could not be enforced as to any of plaintiff’s claims.

After the Court of Appeals ruling in Doe v. Second Street Corp., the Court affirmed its ruling of excluding ALL claims from arbitration in Liu v. Miniso Depot CA, Inc. In Liu, Plaintiff’s main complaint related to allegations of her co-workers harassing her based on her sexual orientation, but also had allegations of whistleblower retaliation, constructive discharge and wage/hour claims. The employer moved to compel arbitration, and the trial court denied the motion for all claims. The Court of Appeals affirmed the trial court’s ruling, indicating that EFAA does not require a pleading sufficiency analysis to determine whether a plaintiff’s claim falls under the statute. The Court of Appeals affirmed the trial court’s ruling that EFAA barred arbitration of the plaintiff’s entire case.

Based on these two rulings, the arbitration agreements in California seem to lose their strength against its employees. These rulings will likely cause plaintiffs to add sexual harassment allegations to the complaint to defeat a motion to compel arbitration. However, employers should, nonetheless, insert arbitration defenses in their answers to complaints as the California Supreme Court or the U.S. Supreme Court have not opined on this issue yet.

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Article by Luiza Manuelian

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