California Court Expands Employee Rights: Full Exemption from Arbitration for Cases Involving Even One Claim of Sexual Harassment Under the EFAA

The California Court of Appeal, in Liu v. Miniso Depot CA, Inc., issued a crucial decision reinforcing employee protections under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA). The court ruled that if a lawsuit includes any sexual harassment claims, the entire case is exempt from arbitration, not just the harassment-related claims. This decision represents a significant step toward ensuring that employees subjected to harassment can pursue their claims in court, rather than being forced into arbitration—a process often perceived as favoring employers.

Yongtong Liu, who had been employed as a human resources administrator at Miniso Depot since April 2021, found herself in a hostile work environment. Her position was reclassified from non-exempt to exempt in January 2022, though her job duties did not change. Liu, a lesbian who presents herself in a non-gender-specific manner, experienced continuous harassment from colleagues based on her sexual orientation and gender identity. She reported offensive remarks about her appearance and body, along with derogatory comments targeting female and LGBTQ employees. In addition, Liu claimed that the company pressured her to engage in unlawful employment practices, and when she refused, the harassment worsened. Unable to endure the toxic workplace any longer, Liu resigned in June 2023 and filed a lawsuit against Miniso Depot in October 2023. Her claims included wage and hour violations, harassment under the Fair Employment and Housing Act (FEHA), retaliation, constructive discharge, and intentional infliction of emotional distress.

Miniso Depot sought to enforce an arbitration agreement Liu had signed at the time of her hiring, which required disputes to be resolved through arbitration under the Federal Arbitration Act (FAA). However, Liu challenged the motion, citing the EFAA, which prohibits mandatory arbitration for claims involving sexual harassment. The trial court ruled in Liu’s favor, determining that because her case included claims covered by the EFAA, the entire arbitration agreement was unenforceable.

On appeal, Miniso Depot argued that only Liu’s sexual harassment claims should be excluded from arbitration, while her other claims, including wage and hour violations, should still be arbitrated. The Court of Appeal disagreed, affirming that when a lawsuit contains a sexual harassment claim, the EFAA applies to the entire case. The court held that the statutory language of the EFAA (9 U.S.C. § 402(a)) is clear—if a case involves a sexual harassment dispute, no pre-dispute arbitration agreement is valid for any part of the case. The court’s interpretation of the word “case,” as opposed to “claim,” underscored its conclusion that the inclusion of one sexual harassment claim exempts all related claims from arbitration, ensuring they are litigated together in court.

This ruling prevents the inefficiencies and potential injustices that could arise from dividing a case between arbitration and court proceedings. Instead, the entire matter will be handled in one venue, allowing all claims to be heard at once.

The decision in Liu mirrors several other recent cases that have clarified the broad scope of the EFAA. In Doe v. Second Street Corp. (Sept. 30, 2024, B330281) ___ Cal.App.5th ___ [2024 WL 4350420], the California Court of Appeal similarly held that when a sexual harassment claim is present, the entire case is exempt from arbitration. Federal courts have taken the same position, as seen in Johnson v. Everyrealm, Inc. (S.D.N.Y. 2023) 657 F.Supp.3d 535, 561, and Turner v. Tesla, Inc. (N.D.Cal. 2023) 686 F.Supp.3d 917, 925, which concluded that arbitration agreements are unenforceable for any case involving sexual harassment claims subject to the EFAA.

For plaintiff-side attorneys, this decision is a powerful tool in protecting clients from arbitration, particularly in cases involving harassment or discrimination. The Court of Appeal’s ruling ensures that employees who file claims of sexual harassment can have their entire lawsuit heard in court, where they have the opportunity to seek justice for all of their claims, not just the harassment allegations.