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New Law Voiding Mandatory Arbitration in Sexual Harassment Cases Only Valid if Case Arose After Law Passed

By Maureen Rubin | Posted on July 9, 2024

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The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFASASHA or the Act) was signed into law in March 2022. Sponsored by Senator Kirstin Gillibrand (D-NY), the new law stops employers from requiring their workers to enter into arbitration regarding incidents related to sexual assault or harassment in the workplace. It amended the Federal Arbitration Act, passed in 1926, to provide for an exception to the rule that requires “nonjudicial facilitation of private disputes through arbitration.”

Jacky R. was a dietary aide at California’s Seal Beach Health and Rehabilitation Center (the Center) from December 2020 to July 2021. The plaintiff sued her employer after EFASASHA was enacted. When her suit went to trial, Los Angeles Superior Court Judge Colin P. Leis ruled that the new law applied to her case and voided the arbitration agreement she had previously signed. He said that “as of March 2, 2022, these types of arbitration agreements are unenforceable period.”

The Center appealed and on July 2, a three-justice panel from Division Eight of California’s Second District Court of Appeal unanimously disagreed with trial judge Leis and reversed his opinion.

Jacky R. will now have to submit to arbitration because Leis “ignored a key statutory note” that has the force of law, according to Justice John Shepard Wiley Jr, who authored the appellate opinion with concurrences by Acting Presiding Justice Elizabeth A. Grimes and Justice Victor Viramontes.

The plaintiff had alleged that several of her co-workers made “sexist and offensive remarks about her” and one employee, Alvaro Esparza, assaulted her in a closet and touched her inappropriately in 2021. Her complaint explained that the Center put Esparza on administrative leave while it “undertook a sham investigation” of the charges. Jacky R. said she could not remain in her position because the company allowed Esparza to continue working at the Center, it refused to take remedial action and it ignored her complaints. Her supervisor, who led the investigation, also called her a “liar.” She resigned in July 2021.

In its response to Jacky R.’s complaint, the Center asked the court to take judicial notice of other actions taken by the plaintiff. It said that in July 2021, the same month as her resignation, she filed Charges of Discrimination with both the Equal Employment Opportunity Commission (EEOC) and the California Department of Fair Housing, now named the Civil Rights Department. She sued after both the EEOC and the State’s Department of Fair Housing issued her a “right to sue notice.”

Her lawsuit, filed in March 2022 against both the Center and Esparza, alleged “sexual battery and battery, hostile work environment, harassment, failure to prevent harassment, and constructive discharge in violation of public policy.” In response, the Center made a motion to compel arbitration based on a previous agreement with the plaintiff.

The timing of Jackie R.’s filing, which occurred after EFASASHA went into effect, is the basis of the appellate opinion which determined whether or not Jackie R. is protected from arbitration by the new law. She argued that the statutory language of the law says that “Notwithstanding any other provision of this title, at the election of the person alleging conduct a sexual harassment dispute or sexual assault dispute…no predispute arbitration agreement…shall be valid or enforceable with respect to a case filed under…law.”

Justice Wiley said that precedent made “short work” of Jackie’s appeal. He immediately cited Kader v. Southern California Medical Center, Inc. (2024) 99 Cal.App.5th 214 (Kader) that referred to the critical “statutory note,” that mandated “This Act, and the amendments made by this Act, shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” (Italics in original).

The opinion further explained that Kader clearly defined what constituted a “dispute” under the statute. In Jacky R.’s case, the dispute was the alleged sexual conduct that had come before EFASASHA became law. Thus, the “dispute arose before the enactment date” when EFASASHA went into effect. The opinion related all the additional steps that Jackie R. took to get her issues resolved with the Center, but the appellate court noted that all of them preceded the date that EFASASHA became law.

As a result, Wiley concluded, “The Act does not apply to this lawsuit.” He continued, “The trial court erred in denying Seal Beach’s motion on this basis.” He pointed out that a dispute does not occur when the lawsuit is filed or even when the underlying conduct occurs. Rather, it refers to “when one party asserts a right, claim, or demand, and the other side expresses disagreement or an adversarial posture.” Going over the dates of Jacky’s actions, he concluded that the dispute arose well before the new law went into effect.

The Justice then provided additional details about the weaknesses in the plaintiff’s case. He said that the only case Jackie R. cited took place a year before passage of the Act and was thus irrelevant. Wiley also referred to portions of the Act cited by Jacky R. that said, “no predispute arbitration agreement…shall be valid or enforceable with respect to a case filed under…law and relates to the sexual assault dispute or the sexual harassment dispute.” However, this quoted language was not persuasive because it actually referred to the Federal Arbitration Act, which was amended by EFASASHA, and thus is no longer valid.

In conclusion, the Second Circuit denied Jacky R.’s request that the court take judicial notice of the entire Act. But the appellate court, while noting that the plaintiff’s motion was filed after her response brief, overruled her motion because it was “tardy” and prevented the Center from responding to new material. He said, anyway “…we do not see how the new material helps Jacky R.”

The case was remanded to the trial court and the Center was awarded costs.

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