Employers have long relied on arbitration agreements to resolve workplace disputes efficiently and cost-effectively. Arbitration offers privacy, faster resolution, and reduced legal costs compared to traditional litigation. But a recent decision by the California Court of Appeal highlights an important limit: employers can no longer compel arbitration in sexual harassment cases—even when a valid arbitration clause exists and the contract selects California law.
In Casey v. D.R. Horton, Inc., a former employee sued the company and a co-worker for sexual harassment. The employer sought to compel arbitration under an agreement governed by California law. The trial court initially agreed, finding the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) inapplicable due to the choice-of-law clause. But on appeal, the California Court of Appeal held that the EFAA preempts state law and overrides any contractual provision that attempts to enforce arbitration in such cases.
The court emphasized that the employment relationship involved interstate commerce—bringing it within the scope of the Federal Arbitration Act (FAA) and its EFAA amendment. The EFAA gives plaintiffs the right to choose a courtroom over arbitration in sexual harassment and assault cases, and that right cannot be waived by a state law or a contract clause. The appellate court ordered the lower court to reverse its ruling and deny arbitration.
For more information or help reviewing your arbitration agreements, contact us at info@mnklawyers.com
