Overview of the EFAA’s Preemption of State Law and What Parties Need to Know
For decades, arbitration agreements were a staple in employment contracts and often used as a first-line defense mechanism to handle workplace disputes, including claims of sexual harassment. However, the federal landscape shifted significantly with the passage of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA), which took effect on March 3, 2022.
This statute, amending the Federal Arbitration Act (FAA), prohibits the enforcement of pre-dispute arbitration agreements and class or collective action waivers in cases involving sexual assault or sexual harassment. As a result, employers can no longer rely on arbitration clauses to divert these claims from the court system.
The EFAA: A Federal Overlay with Broad Preemptive Power
The EFAA operates as a federal overlay that preempts conflicting state laws. It applies nationwide and modifies the FAA, which has long been interpreted by courts to broadly favor arbitration. Importantly:
- The EFAA applies retroactively to agreements entered into before March 3, 2022, as long as the claim arose or is filed after that date.
- It is claim-specific, not agreement-specific. If an employment dispute includes both harassment and non-harassment claims, only the sexual harassment and sexual assault claims are exempt from mandatory arbitration.
- It provides employees the exclusive right to elect whether to pursue qualifying claims in court, regardless of contractual arbitration obligations.
- Courts, not arbitrators, are tasked with determining whether the EFAA applies to a given dispute.
What the EFAA Means for Employers and Counsel
The EFAA has implications for both sides of the bar. From a compliance and litigation planning standpoint, there are several key points practitioners should note:
- Review and update arbitration agreements. Existing templates and onboarding practices may require revisions to carve out claims covered by the EFAA.
- Expect more sexual harassment claims to proceed in court. The elimination of mandatory arbitration is likely to increase the volume of litigated harassment cases.
- Prepare for potential bifurcation of disputes. Mixed claims may lead to split proceedings, with harassment claims proceeding in court and others in arbitration.
- Monitor judicial interpretations. Courts are still grappling with how to apply the EFAA in complex disputes. For example, in Johnson v. Everyrealm, Inc., 657 F. Supp. 3d 535 (S.D.N.Y. 2023), the court held that a plausible sexual harassment claim exempted the entire dispute from arbitration under the EFAA. The court denied the employer’s motion to compel arbitration of any part of the case, interpreting the Act to preclude arbitration of both harassment and non-harassment claims when they are part of the same proceeding.
Other recent cases have taken a similar view, emphasizing that when a plaintiff raises a viable claim of sexual harassment or assault, the EFAA can operate to exempt the entire action from arbitration. Courts have highlighted the statute’s use of the phrase “a case relating to” sexual harassment or assault, interpreting this language broadly. As a result, where factual allegations or legal theories are intertwined with claims of harassment, even ancillary or related claims may remain in court. This has encouraged courts to avoid bifurcating disputes and has reinforced the plaintiff’s statutory right to choose a judicial forum. - Preemption is comprehensive. State laws that purport to allow or require arbitration for sexual harassment claims will yield to the EFAA. This includes states that had previously sought to restrict arbitration through legislation, such as California’s AB 51, portions of which have been held preempted by the FAA.
Recent Development: California Court of Appeal Clarifies EFAA Preemption
In Casey v. Superior Court, No. A170650 (Cal. Ct. App. Feb. 20, 2025), the California Court of Appeal addressed the EFAA’s applicability in a case involving sexual harassment and related claims. Kristin Casey, a former employee of D.R. Horton, Inc., filed suit in court despite having signed an arbitration agreement that included a California choice-of-law clause.
The court held that the EFAA preempts contrary provisions under California law and that the plaintiff could proceed with her harassment-related claims in court. The ruling emphasized that employers cannot contract around the EFAA’s protections through state law or forum selection clauses. This decision reinforces that even in jurisdictions with strong pro-arbitration statutes or history, federal law under the EFAA prevails in the context of sexual harassment and assault claims.
Considerations for Plaintiff and Defense Counsel
- Plaintiff counsel should carefully assess whether a client’s claims fall within the scope of the EFAA. The plaintiff has the right to choose the forum, which may impact strategy, timelines, and settlement leverage.
- Defense counsel must evaluate how to respond when EFAA-covered claims are raised in the context of a broader employment dispute. Strategic decisions about severability, parallel proceedings, and risk management will be critical.
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The EFAA represents a substantive recalibration of the arbitration landscape in employment law. It removes a previously reliable shield for employers and empowers claimants to bring harassment claims in court, even if a mandatory arbitration agreement exists. Whether representing plaintiffs or employers, legal practitioners must stay abreast of developments in EFAA jurisprudence and adjust their litigation and compliance strategies accordingly.
In a legal environment where forum selection can dramatically affect the trajectory of a case, the EFAA underscores the need for deliberate, up-to-date contract drafting and litigation planning. Arbitration is not going away—but for sexual harassment and assault claims, it is no longer the default forum.