Court of Appeal Rules that the choice-of-law provisions cannot circumvent the Ending Forced Arbitration act

On February 3, 2025, the California First District Court of Appeal held that a party to an arbitration agreement cannot rely on a choice-of-law provision to wire around the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (the “EFAA“). The case, Casey v. Superior Court, clarifies that a party cannot circumvent the EFAA and compel a dispute to arbitration by using a pre-litigation choice-of-law provision.

Legal Background

The Federal Arbitration Act (“FAA“) requires courts to enforce arbitration agreements arising from transactions involving interstate commerce. The FAA, passed in 1925, embodies liberal federal policy toward enforcing arbitral agreements. The California Arbitration Act (“CAA“) was passed in 1961 and applies even in situations where the FAA does not. Like the FAA, the CAA provides that pre-dispute arbitration agreements are “valid, enforceable and irrevocable.”

As we have previously written, Congress passed the EFAA in March 2022 to exclude sexual harassment claims from mandatory arbitration provisions. As we have previously written, Congress passed the EFAA in March 2022 to exclude sexual harassment claims from mandatory arbitration provisions. . . The EFAA allows a person to file a claim in court for sexual harassment or assault, even if they previously agreed to arbitrate the dispute. The EFAA is now a part of the FAA. The EFAA does not have a counterpart in California. The Employment Agreement contained a clause that stated that the interpretation and construction of the agreement would be governed by California law. In September 2023 the plaintiff filed a suit against her employer and coworker alleging that they made a series of unwanted comments in late 2022. The plaintiff brought a claim for sexual harassment under the Fair Employment and Housing Act (“

FEHA

“) against both her employer and her coworker. The plaintiff filed a lawsuit against her employer, claiming wage-and-hour violation unrelated to the sexual harassment dispute. The plaintiff opposed this motion, arguing the EFAA was applicable and that the dispute could not have been forced to arbitration. The trial court granted a motion to compel arbitrator on the basis that Employment Agreement’s choice of law provision rendered the EFAA unapplicable. The Court of Appeal’s decisionOn the 3rd of February, the Court of Appeal reversed the judgment of the trial court and concluded that the plaintiff’s dispute fell under the EFAA. The Court of Appeal reached this decision after concluding that the plaintiff’s employment relationship was sufficiently interstate because both the employer and plaintiff’s job duties included interstate communication and business. The Court of Appeal concluded that the CAA was preempted under the doctrine of conflict-preemption, which occurs when “state laws stand in the way of the accomplishment and execution” of Congress objectives. The Court of Appeal stated that relying on the choice of law provision would “directly contradict Congress’s purposes and objectives” in enacting EFAA. The Court stated the Congress expressed its intention to ensure judicial forums for lawsuits involving sexual assault or harassment disputes. The Court reasoned that the plaintiff could choose to invalidate the arbitration provisions of her Employment Agreement in relation to her sexual harassment claim. The Court noted that EFAA applies to any dispute or claim arising or accruing on or after March 3rd, 2022. The plaintiff’s complaint stated that the sexual harassment occurred on December 20, 2022. Because the plaintiff’s claims accrued on or after March 3, 2022, the Court found that the EFAA applied.Finally, the Court of Appeal concluded that the EFAA applied to the plaintiff’s entire lawsuit–including the wage-and-hour claims that were factually unrelated to the plaintiff’s sexual harassment dispute. This result is consistent with previous decisions from California Courts of Appeal that we have covered here. This result is consistent with prior decisions from California Courts of Appeal that we have covered here.Ultimately, the Court of Appeal ordered the trial court to vacate its order compelling arbitration and enter a new order denying the defendants’ motion to compel.Key Takeaways

Casey confirms that parties cannot use choice-of-law provisions in arbitration agreements to circumvent the EFAA. The EFAA prevents a defendant from forcing a plaintiff to litigate a claim involving sexual harassment or assault, regardless of whether a contract contains a choice of law provision. Together, Casey and Liu ensure that more lawsuits containing sexual harassment and sexual assault claims will be heard in court and not compelled to arbitration.

Employers should consult with outside counsel to review their existing employment and arbitration agreements. Employers should also work with experienced counsel to understand what these holdings are and what steps they can take to defend themselves and prevent future lawsuits that could be subject to the EFAA.