In the wake of the “me too” movement, President Joe Biden signed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, 9 U.S.C. § 402(a) (“EFAA”) in March of 2022. The EFAA is an amendment to the Federal Arbitration Act, 9 U.S.C. §1, et seq. (“FAA”), and creates an exception to the FAA’s general rule favoring enforceability of arbitration agreements. In Diaz-Roa v. Hermes Law, LLC, the U.S. Court of Appeals for the Second Circuit joined the Sixth and the Ninth Circuits to hold that a sexual harassment plaintiff may invoke the EFAA for the entire lawsuit, even where the case includes both sexual harassment claims and non-harassment claims.
Ms. Diaz-Roa was employed by Hermes Law and an affiliated entity beginning in 2018. As part of her employment, she earned stock options that vested over three years. When her stock options vested, she sought to exercise her stock options. A month later, Hermes Law terminated Ms. Diaz-Roa’s employment, allegedly for cause. Hermes Law then filed an action in the United States District Court for the Northern District of Texas seeking a declaratory judgment that Ms. Diaz-Roa was not entitled to exercise her stock options because she was terminated for cause. Ms. Diaz-Roa moved to dismiss and Hermes Law filed a motion to compel arbitration based on an arbitration agreement signed by Ms. Diaz-Roa at the beginning of her employment.
Meanwhile, in the United States District Court of the Southern District of New York, Ms. Diaz-Roa filed a complaint for sexual harassment, along with claims related to the failure to honor her stock options. Hermes Law also filed, among other motions, a motion to compel arbitration, again, based on the arbitration agreement signed by Ms. Diaz-Roa.
The Southern District of New York denied the motion to compel arbitration on the basis of the EFAA. Hermes Law appealed, arguing that the EFAA applied only to the sexual harassment claim and not to the entire lawsuit. The Second Circuit rejected this argument and held that the EFAA applied to the entire lawsuit.
In reaching its holding, the Second Circuit focused on the language of the statute. The EFAA states: “Notwithstanding any other provision of this title, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute, or the named representative of a class or in a collective action alleging such conduct, no predispute arbitration agreement or predispute joint-action waiver shall be valid or enforceable with respect to a case …[that] relates to the sexual assault dispute or the sexual harassment dispute.” The Second Circuit focused on the language rendering unenforceable arbitration agreements “with respect to a case … [that] relates to the sexual assault dispute or the sexual harassment dispute.” The Second Circuit essentially found that if Congress had intended to limit the application of the EFAA to just sexual harassment claims, it would have used the word “claims” and not the word “case,” finding that the word “case” generally refers to the “lawsuit as a whole”
Prior to the Second Circuit’s decision, the Sixth Circuit (Bruce v. Adams & Rees, LLP, 168 F.4th 367 (6th Cir. 2026)), and the Ninth Circuit (Ding v. Structure Therapeutics, Inc., 2026 WL 2420555 (9th Cir. Aug. 19, 2026)), had already reached the same conclusion. So too did the New Jersey Superior Court in McDermott v. Guaranteed Rate, Inc., 352 A.3d 1, 23 – 25 (NJ. Super. Ct. Appl. Div. 2025).
The Second Circuit rejected Defendant’s arguments that the FAA uses the words “case” and “action” interchangeably to refer to entire lawsuits, or that Congress and the Constitution had in other cases used the terms “claim” and “case” interchangeably or synonymously. The Second Circuit likewise rejected the argument that applying the word “case” to all claims asserted in the lawsuit renders the words “relates to” in the statute meaningless, finding instead that the use of the phrase indicated Congress’ intent that the statute should sweep broadly. Finally, the Second Circuit rejected any reliance on the liberal federal policy favoring arbitration agreements, finding the EFAA represented a congressional command overriding that policy.
The Second Circuit did not reach a related issue regarding the pleading standard for invoking the EFAA, noting a split in district courts regarding the issue. The issue of whether the standard is that plaintiff must plead a “nonfrivilous” claim related to sexual harassment or assault in order to invoke the EFAA, or whether the Iqbal / Twombly plausibility standard applies, remains unsettled. This is an interesting strategic issue in light of the potential for a plaintiff to plead a sexual harassment claim of questionable merit in order to avoid arbitration.
The EFAA presents complicated litigation and drafting issues, including some unsettled issues regarding the applicable legal standard. Employer-mandated arbitration agreements remain a drafting and enforcement challenge, and the Second Circuit’s opinion reinforces that while there is a general policy towards enforcement of such agreements, it is not guaranteed. In fact, enforceability may depend on factors outside the employer’s control when drafting the agreement because it will depend on the nature of the Plaintiff’s claims. In the litigation context, plaintiffs must plead carefully in order to invoke the EFAA, and employers will need to consider how strongly to challenge the underlying merits of the claim in seeking enforcement of the arbitration agreement.
Patricia C. Collins is a Partner and Employment Law Chair with Antheil Maslow & MacMinn, LLP, based in Doylestown, PA. Her practice focuses primarily on employment, commercial litigation and health care law. Patricia Collins can be contacted at 215.230.7500 ext. 126.
