Two latest choices from the California Courts of Enchantment may have huge ramifications for employers in search of to implement arbitration agreements. Particularly, every court docket every held that the Ending Compelled Arbitration of Sexual Harassment Act (“EFAA”) prohibits separating and arbitrating wage and hour claims which can be a part of the identical go well with as a sexual harassment declare. These holdings give plaintiffs’ legal professionals a brand new instrument try to defeat arbitration agreements and preserve circumstances in litigation. Accordingly, California employers needs to be ready for an inflow of sexual harassment claims being tacked on to in any other case unrelated wage and hour lawsuits.
The EFAA
In March 2022, Congress handed the EFAA to exclude sexual harassment claims from necessary arbitration provisions. In related half, the EFAA reads, “on the election of the individual alleging conduct constituting a sexual harassment dispute or sexual assault dispute, . . . no predispute arbitration settlement or predispute joint-action waiver shall be legitimate or enforceable with respect to a case which is filed underneath Federal, Tribal, or State regulation and pertains to the sexual assault dispute or the sexual harassment dispute.” (emphasis added). Merely put, the EFAA permits an individual bringing a declare for sexual harassment or sexual assault to choose out of a compulsory arbitration provision that they could in any other case be certain by.
As mentioned beneath, the statute’s use of the phrase “case,” as a substitute of the phrase “declare,” had essential ramifications for the California courts presiding over these issues.
The Lawsuit in Doe v. Second Road Corp.
In Doe, the plaintiff filed a lawsuit in February 2023 in opposition to her former employer, a lodge, and two particular person supervisors. The plaintiff alleged that one other coworker (who shouldn’t be a celebration to the lawsuit) sexually assaulted her in October 2019. Due to the alleged sexual assault, the plaintiff requested to not be scheduled on shifts with the coworker who allegedly victimized her. Beginning in October 2021, nonetheless, plaintiff’s supervisor allegedly dismissed her considerations and commenced to schedule her to work with the allegedly offending coworker. In Could 2022, plaintiff’s medical doctors beneficial she stop work as a result of she was suicidal. The plaintiff has not returned to work since. In her lawsuit, plaintiff introduced 11 claims—three regarding the alleged sexual harassment; six for wage and hour violations; and two for slander and libel.
The employer filed a movement to compel arbitration of the complete case, which the trial court docket denied. When doing so, the trial court docket held that all of plaintiff’s claims have been topic to the EFFA as a result of the statute “invalidates an arbitration clause as to the complete case.” Due to this fact, the court docket reasoned, the arbitration provision in Doe couldn’t be enforced as to any of plaintiff’s claims—not simply these alleging sexual harassment.
The employer appealed the trial court docket’s ruling to the California Court docket of Enchantment – Second Appellate District, Division Three.
The Lawsuit in Liu v. Miniso Depot CA, Inc.
One week after Doe was determined, Liu was issued. Liu, who’s a lesbian and clothes in a unisex fashion, sued her former employer, Miniso, in October 2023. The go well with alleges that Miniso’s workers would make unwelcome remarks to Liu. Amongst different issues, Liu claimed that workers made feedback concerning her look, and that workers would describe homosexuals as “creepy.” Liu additionally alleged she was misclassified as an exempt worker and that Miniso did not pay her minimal wage, additional time, and for all of the hours she labored.
In her go well with, Liu introduced a reason behind motion for sexual harassment. However Liu additionally included claims for whistleblower retaliation, constructive discharge, and varied wage and hour violations underneath the California Labor Code.
Miniso filed a movement to compel arbitration. In its movement, Miniso argued that Liu’s criticism didn’t set off the EFAA as a result of her allegations—taken as true—couldn’t assist a sexual harassment declare as a matter of regulation. The trial court docket denied Miniso’s movement and refused to compel arbitration. When doing so, the trial court docket held that the EFAA doesn’t make use of or require a pleading sufficiency evaluation to find out whether or not a plaintiff’s declare falls underneath the statute. And, like Doe, the trial court docket held EFAA barred arbitration of the plaintiff’s complete case.
Miniso appealed to the California Court docket of Enchantment – Second Appellate District, Division One.
The Appellate Courts Affirm
Every appellate court docket affirmed the trial court docket’s holding. Particularly, each courts of attraction held that EFAA covers a plaintiff’s complete case—not simply the sexual harassment claims introduced therein.
The Doe court docket targeted on the time period “case” to conclude that the EFAA prohibited arbitrating plaintiff’s wage and hour claims. First, the court docket famous the distinction between a “declare” and a “case.” A “declare,” the court docket mentioned, is taken into account the premise for restoration, whereas a “case” encapsulates the complete authorized continuing. Accordingly, the EFAA’s use of the phrase “case” extends the statute to cowl plaintiff’s complete lawsuit, not simply particular person claims. In reaching this conclusion, the court docket distinguished Doe from a federal case, Mera v. SA Hospitality Group, Inc., which involved a sexual harassment declare and a wage and hour class motion. The Mera court docket reasoned that the category claims may very well be separated from the sexual harassment declare and arbitrated for the reason that class declare did “not relate in any method to the sexual harassment dispute.” Conversely, the Doe court docket concluded that though not all the plaintiff’s claims “come up out of her sexual harassment allegations,” the “case” as an entire unquestionably “pertains to” a sexual harassment dispute. In reaching this conclusion, the court docket famous with significance that each one of plaintiff’s claims have been asserted in opposition to the identical defendants and arose out of her employment by the lodge. Thus, the court docket concluded the EFAA additionally barred necessary arbitration of the plaintiff’s wage and hour claims.
The appellate court docket in Liu reached the identical conclusion. The Liu court docket similarlydistinguished between the phrases “declare” and “case.” The court docket reasoned that if Congress wished the EFAA to cowl solely elements of a “case,” it might have as a substitute used the phrase “declare.” However the court docket in Liu went even additional. Somewhat than making an attempt to differentiate Mera on the premise that case was a wage and hour class motion, the Liu court docket merely discovered Mera unpersuasive. Particularly, the Liu court docket reasoned that Mera impermissibly added phrases to the EFAA to conclude {that a} “case” may very well be break up up. Discovering the EFAA’s language unambiguous, the Liu court docket additionally refused to contemplate the statute’s legislative historical past when making its ruling.
Key Takeaways
Liu and Doe may have huge ramifications for California employers. Within the quick time period, employers might even see a spike in potentially-frivolous sexual harassment claims being added to wage and hour lawsuits—as plaintiffs’ legal professionals attempt to keep away from arbitration. However the situation may very well be comparatively quick lived. In all probability, the California Supreme Court docket or america Supreme Court docket will ultimately think about whether or not the EFAA’s influence is as broad as Liu and Doe have held.
For now, employers ought to proceed to vigorously assert arbitration defenses by way of their solutions as a way to protect their proper to arbitrate claims within the occasion Liu and Doe are overturned. Employers must also proceed to try to compel arbitration regardless of Liu and Doe by distinguishing these circumstances by way of any means doable.
As all the time, employers ought to seek the advice of with skilled labor and employment litigation counsel for methods in gentle of the shifting authorized panorama.