Companies who have taken great care to ensure their employees sign binding arbitration agreements as a condition of employment are facing a new obstacle to enforceability: the Ending of Forced Arbitration Act (EFAA). The 2022 amendment to the Federal Arbitration Act has resulted in a substantial increase in sexual harassment causes of action within employment-related suits and caught some employers who believed they had airtight arbitration agreements off guard.
Legislative History and Intent
Prior to the EFAA’s enactment in 2022, California employers were primarily concerned with ensuring their arbitration agreements conformed to the criteria set forth by the California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. App. 83. To satisfy Armendariz, the arbitration agreement must: (1) provide for a neutral arbitrator; (2) provide for more than minimal discovery; (3) require a written arbitration award; (4) provide for the types of relief that would be available in court; and (5) not require the employee to bear the expenses associated with the arbitration forum. (Id.) While the Armendariz requirements are still necessary for a defendant employer to succeed in compelling a case to arbitration, the EFAA adds a new wrinkle, and has provided new strategies to plaintiffs’ counsel for avoiding enforcement.
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 was signed into law by President Biden on March 3, 2022, and codified as a new Chapter 4 of the Federal Arbitration Act at 9 U.S.C. §§401-402. The EFAA allows a litigant alleging sexual assault or harassment to void a pre-dispute arbitration agreement or joint-action waiver (9 U.S.C. §402). The legislation was borne following decades of United States Supreme Court decisions expanding the reach of mandatory arbitration and the #MeToo movement’s exposure of how these agreements silenced victims. Prior to its passage, states including California, New York, New Jersey and Washington unsuccessfully attempted to restrict employers from forcing arbitration of sexual harassment claims, running into the Federal Arbitration Act’s (FAA) equal-footing principle, which pre-empted the state legislation providing special treatment to sexual harassment and sexual assault claims. The EFAA sought to resolve this conflict between federal law and the efforts begun by many state legislatures by incorporating such treatment within the FAA.
The legislative intent was to prevent harassers and assailants from hiding underneath the protection of the trappings of arbitration and to allow victims to publish their allegations in litigation, thereby empowering victims to speak out and enabling potential future victims to become more easily aware of harassment occurring within their workplaces. The roll-out has encountered challenges in practice.
Concerns for Employers
In the wake of the EFAA, plaintiffs’ employment attorneys have increasingly pursued a strategy of including a cause of action for sexual harassment alongside Labor Code violations and claims of discrimination, harassment, or wrongful termination based upon an employee’s membership in another protected class or engagement in unrelated protected activity, as a means of seeking to litigate disputes despite an otherwise enforceable arbitration agreement. Employer defendants then face a dilemma when confronted what is believed to be a frivolous claim.
9 U.S.C. § 401 defines a “sexual harassment dispute” as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” Section 402(a) provides that, at the election of the person alleging such conduct, “no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable 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.” Congress’s deliberate use of the word “case” rather than “claim” is the textual cornerstone of the entire-case exemption rule.
The California Court of Appeal reached a consistent definition of “dispute” in Kader v. Southern California Medical Center, Inc. (2024), 99 Cal.App.5th 214. It held that a dispute arises when one party asserts a right, claim, or demand, and the other side expresses disagreement or takes an adversarial posture, and that a dispute cannot arise until both sides have expressed their disagreement, either through words or actions. In Kader, the EFAA applied because the employee had never complained to the employer about the harassment before filing Department of Fair Employment and Housing (DFEH) charges in May 2022. Without the employer’s knowledge of the alleged harassment and opportunity to express disagreement, no dispute existed before the EFAA’s effective date.
For continuing violations, which most commonly arise in hostile work environment cases, Doe v. Second Street Corp. (2024) 105 Cal.App.5th 522 held that a sexual harassment claim accrues on the date of the last act constituting the violation, even if some of the underlying conduct occurred before March 3, 2022. The court reasoned that Congress imported the well-established continuing-violation accrual rule when it used the term “accrue” in the EFAA’s timing provision. Casey v. Superior Court (Cal. App. 2025)108 Cal.App.5th 575.
Thus, a complaint involving a dispute that arose following March 3, 2022, where an employee alleges sexual harassment as part of their complaint will be fully litigated with no portion thereof (including the claims of additional named plaintiffs who do not allege any personal experience of sexual harassment or assault) compelled to arbitration.
An employee’s only evidence of sexual harassment may be their own testimony, despite an employer’s potentially dispositive evidence to the contrary. A defendant’s assertion that the alleged sexual harassment was factually impossible does not, by itself, defeat EFAA protection at the motion to compel arbitration stage. This is because the EFAA gateway inquiry is a pleading-stage analysis, not a merits determination. When a court evaluates whether the EFAA applies, it accepts the plaintiff’s factual allegations as true and draws all reasonable inferences in the plaintiff’s favor. A defendant’s competing factual narrative is a merits defense that goes to the ultimate truth of the allegations, not whether the complaint plausibly alleges a sexual harassment dispute. Ding v. Structure Therapies, Inc., NASDAQ, (9th Cir. 2026) 187 F.4th 1231.
The danger in attempting to discredit the claims through discovery, such as depositions or written discovery, or filing an answer without a concurrent motion to compel arbitration, is that the plaintiffs will be able to keep the case in superior court based on a waiver argument. This occurred in Mitchell v. Lilac Sols., Inc. (Cal. Ct. App. Aug 20, 2026) 122 Cal. App. 707. In that case, the defendants explicitly articulated a strategy of delaying their motion to compel arbitration in order to develop facts that would challenge the viability of the plaintiff’s sexual harassment claim. They theorized that once they could demonstrate the harassment claim was baseless, the EFAA would no longer apply and arbitration would be available. The court rejected this approach, finding that the defendants had waived their right to arbitrate by engaging in extensive litigation activity, serving 12 sets of written discovery, noticing depositions, filing multiple motions, and responding to 33 sets of the plaintiff’s discovery, before eventually moving to compel arbitration.
Increasingly, plaintiffs who may have genuinely experienced sexual harassment are litigating claims in an environment where unsubstantiated or potentially frivolous claims receive the same treatment under the EFAA. The EFAA’s application has extended beyond protecting victims and preventing harassers and abusers from relying on arbitration agreements to its use as a litigation strategy to avoid arbitration of other claims, even where the sexual harassment claim serving as the basis for keeping the case in court has limited likelihood of success on the merits.
Recent Decisions Narrowing Expansive Protection of the EFAA in Weak or Non-Viable Sexual Harassment Claims
While the EFAA remains in full force and effect with respect to allegations of sexual assault or sexual harassment, courts appear to have begun recognizing the use of the EFAA as a litigation tactic to avoid arbitration of an employee’s underlying claims.
To invoke the EFAA and defeat a motion to compel arbitration, a plaintiff must allege a cognizable sexual harassment claim; a label alone will not suffice. (9 U.S.C. §401). It remains to be conclusively decided by the Ninth Circuit and California Court of Appeal whether a Federal Rule of Civ. Pro. 12(b)(6) “plausibility” standard applies, or if the less challenging “nonfrivolous” standard applies. Every recent court to rule on the issue has applied or assumed the plausibility of standard without yet conclusively affirming that is the governing test. The concern motivating courts to adopt the stricter standard is that an unsubstantiated or quickly dismissed harassment allegation could be used to pull the entire case out of arbitration.
On August 19, 2026, the Ninth Circuit Court in Ding v. Structure Therapies, Inc., NASDAQ (9th. Cir. 2026) 187 F.4th 1231, 1239, the court held that because the parties agreed that the EFAA requires a plaintiff to “plausibly plead” a sexual harassment claim, the court “assume[d] without deciding that the EFAA imposes that requirement” and then applied the FRCP 12(b)(6) standard, accepting all allegations as true and drawing all reasonable inferences for the plaintiff. Applying this standard, it found that Dr. Ding had plausibly pleaded severe or pervasive, objectively offensive, sex-based conduct, so the EFAA applied and the arbitration agreement was unenforceable in the case. Id. at 1240-1241.
In Chin v. DoorDash, Inc. (October 5, 2026) 2026 WL 2982141, the California Court of Appeal distinguished the Ding decision on the basis of waiver. Specifically, where a plaintiff is aware of a sexual harassment claim arising from the same events already pleaded, the court may compel arbitration if the plaintiff fails to timely assert the claim or invoke the EFAA. This may result in the loss of EFAA protection for both pleaded and withheld claims. In Ding, by contrast, the plaintiff did not become aware of the sexual harassment claim until it was uncovered during arbitral discovery.
Courts handle a deficient EFAA-triggering allegation through ordinary pleading-cure mechanisms, not automatic enforcement of the arbitration agreement. The Northern District of California, in its opinion in Ding v. Structure Therapeutics, Inc. (2024) 755 F.Supp.3d 1200, 1219–1220, which was later affirmed, stated that, had it not found that the plaintiff plausibly pleaded sexual harassment, it “would have given Plaintiff leave to amend to fully set out her allegations.”
In the California Court of Appeal, like the Ninth Circuit, the standard of “plausibility” vs. “nonfrivolous” remains open, as framed in Stoker v. Blue Origin, LLC (April 24, 2026) 120 Cal.App.5th 91. Blue Origin argued the EFAA applies “only if a sexual harassment claim is ‘plausibly’ pled” whereas plaintiff countered that the EFAA requires only a “nonfrivolous” allegation. Id. at 102-103. The court declined to resolve the pleading standard issue, instead affirming the denial of arbitration on unconscionability grounds. Id.
In Decloedt v. RadNet Management, Inc. (June 26, 2026) 121 Cal.App.5th 732, the court tackled allegedly conclusory harassment allegations. The employer argued the EFAA required facts “sufficient to survive a motion to dismiss under Rule 12(b)(6)” and argued that the plaintiff’s claims fell short. Id. 744-745. The court then “[a]ssum[ed] in arguendo” that the Rule 12(b)(6) plausibility applied and recited the Twombly/Iqbal test. Id. It went on to reject the argument that plaintiff’s allegation of “continual[]” sexual-orientation harassment should be disregarded as conclusory, reasoning that under Iqbal, a pleading need not contain “detailed factual allegations” and that “continually” was not a “legal conclusion couched as a factual allegation.” Id. at 748. A sufficiently pleaded FEHA sexual harassment claim therefore triggered the EFAA exemption. Id.
In Ai v. Tencent America, LLC (N.D. Cal. July 28, 2026) 2026 WL 2170875, the court applied the plausibility standard in determining whether the EFAA exemption applied and declined to apply the exemption where the alleged sexually harassing comments consisted of telling the plaintiff, “let me put on my pants first,” and referring to her as the “boss’s wife” and the “landlady who collects rent.”
The courts appear to be nearing a ruling whereby the stricter FRCP 12(b)(6) plausibility standard is adopted in favor of the “nonfrivolous” standard advocated for by employees.
Conclusion
The EFAA appears to be here to stay for its intended legislative purpose. However, courts are becoming wise to the use of flimsy claims of sexual harassment pleaded for purposes of avoiding arbitration of an entire case. In the coming months and years, greater clarity is likely to emerge regarding the limits of the EFAA exemption, particularly in cases involving claims brought strategically with limited factual support.