No Arbitration Even If Only One Claim Is Covered By EFAA

Seyfarth Synopsis: The federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”) renders arbitration agreements unenforceable with regard to claims of sexual assault and sexual harassment. The California Court of Appeal recently held that the plain language of the EFAA exempts a plaintiff’s entire case from arbitration where the plaintiff asserts at least one claim subject to the EFAA. Yongtong Liu v. Miniso Depot CA, Inc.

Facts

Yongtong Liu (“Liu”) sued her employer, Miniso Depot CA, Inc. (“Miniso”), for various employment-related claims, one of which was sexual harassment. Liu also asserted wage and hour and retaliation claims, and that she was constructively discharged.

The Trial Court Decision

Relying on the arbitration agreement that Liu signed when she accepted Miniso’s job offer, Miniso moved to compel all of Liu’s claims to arbitration. Miniso argued that all of Liu’s claims were covered by the arbitration agreement, because all of the claims arose in connection with Liu’s employment. Miniso further contended that the EFAA did not apply because Liu’s allegations of sexual harassment failed to state a claim for harassment and, thus, her complaint effectively had no harassment claim.

The Superior Court of Los Angeles County denied Miniso’s motion to compel arbitration. The trial court found that Liu had adequately stated a claim for sexual harassment and, based on the EFAA, that the arbitration agreement was unenforceable as to all of Liu’s claims. The trial court relied on two federal district court opinions, Johnson v. Everyrealm, Inc., 657 F. Supp. 3d 535, 561 (S.D.N.Y. 2023) and Turner v. Tesla, Inc., 686 F. Supp. 3d 917, 925 (N.D. Cal. 2023), which held that when a complaint includes a single claim for sexual harassment to which the EFAA applies, then the arbitration agreement is unenforceable “with respect to [the plaintiff’s] entire case.” Miniso appealed.

The Appellate Court Decision

The California Court of Appeal affirmed the trial court’s decision. The sole issue considered was “whether the EFAA exempts from arbitration all causes of action in a complaint that asserts both sexual harassment and non-sexual harassment claims, or whether a trial court may still compel arbitration of the non-sexual harassment claims.” Miniso abandoned its argument that the EFAA did not apply to Liu’s sexual harassment claims and conceded this point on appeal.

In affirming the trial court’s decision, the Court of Appeal held that the EFAA’s plain language invalidates arbitration agreements as a whole, not just as to the sexual harassment claims. The Court of Appeal also underscored that this interpretation of the EFAA avoids the inefficiency of having separate proceedings for different claims, and aligns with the legislative intent to protect plaintiffs from being compelled into arbitration for sexual harassment disputes.

What Liu Means for Employers

Unless reversed, the Liu decision, and others like it, will make it more difficult for employers to compel non-EFAA claims to arbitration if the complaint also contains a claim of sexual harassment or sexual assault. As a result, California employers can expect to see an increase in the number of cases in which claims of sexual harassment or sexual assault are alleged alongside other claims.