On February 3, 2025, the California First District Court of Appeal issued a significant ruling in Casey v. Superior Court, reaffirming that employers cannot use contractual choice-of-law provisions to sidestep the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 ("EFAA"). This decision strengthens legal protections for employees, ensuring that claims of sexual harassment and sexual assault are heard in court rather than forced into arbitration.
For more information on EFAA and its potential impact on your organization, please contact our Partner and Head of Litigation, Ted Wells, at contact@consultils.com.
Background
Arbitration agreements have traditionally been enforced under the Federal Arbitration Act ("FAA"), which promotes arbitration in disputes involving interstate commerce. California law also supports arbitration through the California Arbitration Act ("CAA"). However, the EFAA, enacted in 2022, created a clear exception: individuals alleging sexual harassment or sexual assault have the right to pursue their claims in court, even if they previously signed arbitration agreements.
The EFAA amended the FAA to prohibit the enforcement of pre-dispute arbitration agreements in cases involving sexual misconduct. Since California does not have a state-level equivalent to the EFAA, federal law governs in such cases.
Case Overview: Casey v. Superior Court
In Casey, the plaintiff signed an employment contract in 2017, which included an arbitration agreement governed by California law. In late 2022, she filed a lawsuit alleging sexual harassment under the Fair Employment and Housing Act ("FEHA"), along with wage-and-hour claims against her employer. The employer and a coworker sought to compel arbitration based on the employment contract.
The trial court ruled in favor of the employer, finding that the agreement’s choice-of-law provision meant the EFAA did not apply. The plaintiff appealed, arguing that the EFAA preempted the arbitration agreement.
Court of Appeal Decision
The Court of Appeal reversed the trial court’s ruling, concluding that the EFAA applied and preempted the CAA. The key points from the court’s reasoning include:
Interstate Commerce Requirement: The court found that the plaintiff’s job duties and her employer’s business involved interstate commerce, making the FAA and the EFAA applicable.
Federal Preemption: The court applied the principle of conflict preemption, which holds that federal law overrides state law when the two conflict. Allowing a choice-of-law provision to nullify the EFAA would contradict Congress’s intent to provide access to the courts for sexual harassment and assault claims.
Retroactivity of the EFAA: The employer argued that the arbitration agreement was signed in 2017, before the EFAA was enacted. The court disagreed, explaining that because the alleged harassment occurred in 2022—after the EFAA’s effective date—the law applied.
Impact on Related Claims: The court held that because the case included a sexual harassment claim covered by the EFAA, all related claims—including the wage-and-hour claims—had to be litigated in court rather than arbitrated.
Key Takeaways for Employers
Review Arbitration Agreements: Employers should consult legal counsel to ensure their arbitration agreements comply with the EFAA and recognize that choice-of-law clauses will not override federal protections.
Reevaluate Employment Policies: Companies should implement strong workplace policies and training programs to prevent harassment and minimize litigation risks.
Prepare for Increased Litigation Exposure: The decision means more claims will proceed in court, potentially increasing legal costs and public exposure.
The Casey decision reinforces that courts are upholding federal protections against forced arbitration in sexual harassment cases. Employers must stay informed and proactive in adjusting their policies to align with both state and federal law.
For more information on EFAA and its potential impact on your organization, please contact our Partner and Head of Litigation, Ted Wells, at contact@consultils.com.
Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.
Ted Wells is an accomplished and talented litigator with a proven record of success. Ted has routinely secured judgments in the millions, with a number of published opinions in his career.
Ted represents employers and businesses before state and federal courts, arbitral tribunals, and administrative agencies in a wide variety of employment and business litigation matters, including contract, business tort, fraud, consumer protection, discrimination, harassment, retaliation, wrongful discharge, and wage and hour lawsuits.
Email: contact@consultils.com | Phone: 626-344-8949
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