On September 30, 2026, the Second Circuit (covering New York, Connecticut, and Vermont) held that when an employee’s lawsuit includes a sexual harassment or sexual assault claim covered by the Ending Forced Arbitration Act (EFAA), the employee may choose to litigate the entire lawsuit in court, including unrelated claims that would otherwise go to arbitration. Diaz-Roa v. Hermes Law, PC (2d Cir. 2026). The Second Circuit is the third federal appeals court to reach this conclusion this year, following the Sixth and Ninth Circuits. For employers that rely on arbitration agreements, a sexual harassment allegation now likely means the whole case stays in court.
Background
In 2022, following the #MeToo movement, President Biden signed the EFAA into law. See our October 24, 2024, Alert, New Jersey Judge Interprets EFAA As Requiring Employment Claims to Be Split Into Two Forums. This law modified the Federal Arbitration Act (FAA) so that an employee cannot be forced to arbitrate:
conduct constituting a sexual harassment dispute or sexual assault dispute … with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute.
9 U.S.C. § 402(a). The EFAA was intended, in part, to make it less likely that repeat bad actors can avoid public scrutiny by allowing employees to bring their claims in court as opposed to a private and usually confidential arbitration process even if they signed an otherwise binding arbitration agreement.
Courts across the country have been interpreting the limits of the EFAA and its applicability in a variety of circumstances. As explained below, there have been some seemingly inconsistent judicial interpretations about whether the EFAA renders pre-dispute arbitration agreements unenforceable as to all claims in a multiclaim dispute where the plaintiff has pled at least one claim involving sexual harassment or sexual assault.
Inconsistency Among the Courts Regarding Multiple Claims
Courts have split in two general directions with respect to litigants with a mixture of employment law claims. While not all courts have spoken, the current majority view is that if there is even one sex-related claim, none of the claims brought in the lawsuit are subject to mandatory pre-dispute arbitration. For example, if the employee complains of sexual harassment and race discrimination, neither claim is subject to mandatory arbitration. This approach has been adopted by the federal courts of appeal in the Ninth and Sixth Circuits and several state courts.
Arguably consistent with the majority approach is the Second Circuit’s decision in Olivieri v. Stifel, Nicolaus & Company, Inc., 112 F.4th 74 (2d Cir. 2024). In Olivieri, the court considered whether the EFAA’s language “relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law” permitted the plaintiff to sue in court for retaliation because her retaliation claims did not fall into the definition of a sexual harassment dispute. The Second Circuit held that since the plaintiff-employee’s retaliation claims arose from her sex harassment claims, the employee could pursue her retaliation claims in court. In short, the employee in Olivieri was not bound by a prior executed arbitration agreement to arbitrate her retaliation claim.
The minority approach is reflected by New Jersey Bergen County Superior Court Judge John O’Dwyer’s ruling in Paton v. Davis Saperstein. In that case, the court applied the EFAA to dismiss the plaintiff’s wage and hour, retaliation, and discrimination claims as barred by an arbitration agreement, but refused to dismiss her lawsuit’s claims arising from alleged sexual harassment.
This minority approach has serious practical implications for employers. In particular, the courts holding that sexual harassment or sexual assault claims are severable from the other claims may effectively require an employer to defend employment claims in two venues, before both a judge and an arbitrator. Thus, for example, in Delirium TV, LLC v. Dang, a Texas Court of Appeals considered the severability issue and held the employee should arbitrate her wage claims but could pursue her sexual assault claims in court.
The Second Circuit’s EFAA Position Is Being Refined
In Diaz-Roa, the plaintiff sued her employer asserting claims for sexual harassment, as well as claims that her former employer unlawfully terminated her employment to prevent her from exercising previously issued stock options. The Second Circuit held, consistent with the majority approach, that the EFAA enables a plaintiff to circumvent a pre-dispute arbitration agreement as to the entire lawsuit, rather than only the sexual harassment or sexual assault claims contained within that lawsuit.
Another appeal respecting the scope of the EFAA is pending on the Second Circuit’s docket, Brazzano v. Thompson Hine LLP, which was argued in May this year. In Brazzano the plaintiff claimed she experienced a sexually hostile work environment. The plaintiff alleged thirteen claims in total, and the defendant moved to compel them all to arbitration even though several did not involve sexual harassment or sexual assault. The defendant argued that the alleged sexual harassment occurred years before the EFAA was enacted and was not linked to the plaintiff’s non-sex-related claims.
The Diaz-Roa and Brazzano appeals reflect that this area of law is a work in progress, and employers cannot assume that their arbitration agreements will be enforceable when a lawsuit includes claims of sexual harassment or assault.