Articles Discussing The California Fair Employment And Housing Act (FEHA).

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By: Sexual Harassment Claims Covered Under the EFAA Exempt Entire Case from Arbitration

Earlier this week, a California Court of Appeal affirmed the trial court’s decision in Liu v. Miniso Depot CA, Inc., et al., which held that the plain language of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”) exempts a plaintiff’s entire case from arbitration where the plaintiff asserts at least one sexual harassment claim subject to the EFAA.

Plaintiff Yongtong Liu was hired in April 2021 by Defendant Miniso Depot as an hourly-paid human resources administrator. In January 2022, Liu was re-classified by the company as an exempt employee, though her job duties did not change. Throughout her employment, Liu, who identified as a lesbian and dressed in “unisex non-gender specific style,” alleged that she was subjected to unwelcome, severe and pervasive harassment and discrimination based on her sexual orientation and gender. Liu alleged that comments were made about her appearance, attractiveness, and body. She further alleged that derogatory comments were made about female and homosexual employees generally. Liu also alleged that she was asked to participate in hiring, pay, and immigration practices which she believed to be illegal, and when she refused to comply with those practices, the harassment and discrimination against her increased. As a result, Liu resigned in June 2023, and filed suit against Miniso in October 2023 for wage and hour violations as well as sexual and sexual orientation/gender identity harassment and discrimination under the Fair Employment and Housing Act (“FEHA”), retaliation, constructive termination, and intentional infliction of emotional distress.

Miniso filed a motion to compel arbitration of all of Liu’s claims under the Federal Arbitration Act (“FAA”) in reliance on the arbitration agreement that Liu had signed when she accepted Miniso’s job offer. Liu opposed Miniso’s motion to compel arbitration, arguing that her sexual harassment claim under FEHA exempted her entire action from arbitration under the EFAA. The trial court agreed with Liu and denied Miniso’s motion to compel arbitration, finding that when a complaint includes a claim for sexual harassment to which the EFAA applies – the arbitration agreement is unenforceable as to the plaintiff’s entire case.

Miniso appealed the trial court’s decision. While Miniso conceded that the EFAA applied to Liu’s claims for sexual harassment and sexual orientation/gender identity harassment, it contended that the trial court erred in its conclusion that the arbitration agreement was unenforceable as to all of Liu’s claims. Instead, Miniso argued that the trial court should have compelled Liu to arbitrate all of her claims, except the two sexual harassment claims.

The California Court of Appeal, Second Appellate District, disagreed with Miniso and affirmed the trial court’s decision. It held that under the EFAA, when a plaintiff’s lawsuit contains at least one claim that fits within the scope of the EFAA, the arbitration agreement is unenforceable as to all claims asserted in the lawsuit.

The Court of Appeal found that the statutory language of the EFAA was clear on its face, citing in relevant part, “at the election of the person alleging conduct constituting a sexual harassment dispute… no pre-dispute arbitration agreement… shall be valid or enforceable with respect to a case… which is filed under… [s]tate law and relates to… the sexual harassment dispute.” FAA, 9 U.S.C. Section 402(a). The Court concluded that, because Congress chose the term “case,” rather than “claim,” the plain language of the statute allowed Liu to be exempt from mandatory arbitration for all of the claims in her case so long as one of her claims was covered under the EFAA. The Court further noted that their ruling avoided the potential for inefficiency and related burden in having the parties litigate separate proceedings in court and an arbitration forum.

Other courts have recently reached a similar result. In Doe v. Second Street Corp., (Sept. 30, 2024, B330281) ___ Cal.App.5th ___ [2024 WL 4350420], the court found that the plain language of the EFAA applied to the entire case, not merely the sexual assault or sexual harassment claims alleged as a part of the case. Similarly, two federal district court opinions, Johnson v. Everyrealm, Inc., (S.D.N.Y. 2023) 657 F.Supp.3d 535, 561, and Turner v. Tesla, Inc. (N.D.Cal. 2023) 686 F.Supp.3d 917, 925, both held that when a complaint includes a claim for sexual harassment to which the EFAA applies. the arbitration agreement is unenforceable with respect to a plaintiff’s entire case. There has been one decision where the court ruled differently (Mera v. SA Hospitality Group, Inc. (S.D.N.Y. 2023) 675 F.Supp.3d 442), finding that the parties’ arbitration agreement was unenforceable with respect to the plaintiff’s hostile work environment claims, but was enforceable with respect to the plaintiff’s unrelated wage and hour claims that were pled on behalf of a class of individuals.

This decision highlights the potentially expansive reach of the EFAA. Please contact your favorite CDF attorney if you have any questions about this case.

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