In 2022, Congress enacted the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act” (the “Act”) which provides that, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, “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.”  (9 U.S.C. § 402, emphasis added).  

In two recent cases, Doe v. Second Street Corp. and Liu v. Minsio Depot CA, Inc., the California judiciary emphasized the word “case” in the statute, contrasting it with other common descriptors such as “cause of action” or “claim.”  California’s Court of Appeal, Second District, hearing both Doe and Liu, reasoned that the statutory language of the Act was clear on its face.  Because Congress chose the term “case,” rather than “claim” or “cause of action”, the plain language of the statute allows plaintiffs to be exempt from mandatory arbitration for all of the claims in their case so long as one of the claims was covered under the Act  According to the court, a “claim,” is considered the basis for recovery, whereas a “case” encapsulates the entire legal proceeding.

In Liu, this meant that the plaintiff’s individual misclassification claims, gender discrimination claims, and retaliation claims, like the plaintiff’s sexual harassment claim, were exempt from mandatory arbitration under the Act.  In Doe, this meant the plaintiff’s individual wage and hour claims, like the plaintiff’s sexual harassment claim, were exempt from mandatory arbitration.

The boundaries of the Doe and Liu opinions are of considerable concern for employers.  Specifically, how might a court rule in the event of a sexual harassment claim filed with a wage and hour class action?  In Liu, the court specifically noted that it was not called upon to rule on that question.  In Doe, the court left open the possibility that the Act might not apply to wage and hour class action claims that are not asserted by “the same plaintiff” and do not arise out of the same course of employment with the defendant.  This question highlights the overwhelming concern raised by the Legislature’s use of the word “case” rather than “claim” or “cause of action.”  If Doe and Liu are applied broadly and remain unchallenged, unwary employers may see a spike in sexual harassment claims, regardless of merit, if only to allow the employee to escape an otherwise valid arbitration agreement.  Short of a challenge to the Act on a state or federal level, enforcing arbitration agreements may become more difficult than ever before.