Picture this: For the last year, your company has been engaged in protracted arbitration with a former employee. You've attended preliminary hearings, gone through exhaustive document production, and litigated several discovery disputes. Now, suddenly, the former employee is withdrawing from arbitration. Good news? Not quite. She is simultaneously filing a related lawsuit in court and, for the first time, alleging that she was subjected to a sex-based hostile work environment.
Surely, after choosing arbitration and actively participating for a year, the former employee is stuck with that forum. Right? According to the Ninth Circuit's recent decision in Ding v. Structure Therapeutics, Inc., not necessarily.
How Does the EFAA Affect Employment Arbitration Agreements?
Enacted in 2022, the EFAA gives individuals alleging sexual assault or sexual harassment a choice between arbitration and court—regardless of whether that individual signed a pre-dispute arbitration agreement. Under the EFAA, when a person alleges conduct constituting a "sexual harassment dispute" or a "sexual assault dispute," no pre-dispute arbitration agreement is valid or enforceable with respect to the filed case. The EFAA provides that questions of its applicability must be decided by a court, not an arbitrator.
Ding v. Structure Therapeutics: From Employment Arbitration to Court
In 2021, when Structure Therapeutics, Inc. hired Ding as its chief financial officer, Ding's offer of employment required all employment disputes to be resolved "by final, binding and confidential arbitration." According to Ding's complaint, shortly after her employment began she was the victim of a domestic violence incident. Ding alleged that only days after telling her supervisor about that incident, the supervisor recommended her for termination.
Following her termination, and consistent with her arbitration agreement, Ding filed an arbitration demand asserting claims for discrimination, retaliation, and harassment based on her national origin and status as a victim of domestic violence. Over the course of a year, the parties attended preliminary hearings, began discovery, stipulated to a protective order, and litigated discovery disputes. More than a year after demanding arbitration, Ding withdrew from the proceedings and instead filed a complaint in California state court.
Now in state court, Ding asserted, for the first time, a sex discrimination claim and a sex-based hostile work environment claim. Structure moved to compel Ding back to arbitration, and. Ding opposed the motion, arguing that the EFAA rendered her arbitration agreement invalid. The district court sided with Ding and Structure appealed to the Ninth Circuit.
The Ninth Circuit Clarifies When EFAA Rights May Be Invoked
The Ninth Circuit affirmed the district court's denial of Structure's motion to compel arbitration. Critically, the court held that the EFAA does not limit when an employee may allege a sexual harassment claim or exercise EFAA rights. Where an employee discovers a basis for an EFAA-covered claim during arbitration, she may elect to end arbitration and proceed in court. Ding's initial arbitration demand—which asserted non-sexual-harassment claims—did not constitute an EFAA "election" because she was not yet a "person alleging conduct constituting a sexual harassment dispute."
The court also emphasized that the EFAA invalidates an arbitration agreement with respect to a "case," not merely a single claim. As a result, once Ding invoked the EFAA for her sexual harassment claim, her entire case—including the non-sexual-harassment claims—could proceed in court.
The court was careful, however, not to give employees an unrestricted right to switch forums whenever doing so becomes strategically advantageous. Ordinary waiver principles still apply. An employee may waive EFAA rights by knowingly deciding to pursue a sexual harassment claim in arbitration or by intentionally delaying invocation of a known right. But because the record did not show that Ding knew she had a plausible sex-based harassment claim when she initiated arbitration, the court found no intentional waiver.
What the Ninth Circuit's EFAA Decision Means for Employers
The Ninth Circuit's Ding decision interpreting the EFAA is immediately binding on employers in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. Additionally, employers nationwide should count on plaintiffs to rely on the Ninth Circuit's reasoning as courts continue to define the EFAA's scope.
Employers using arbitration agreements or currently in arbitration proceedings should remember:
- Do not assume that an arbitration demand permanently fixes the forum. Even a year of hearings and discovery disputes did not prevent Ding from moving to court. Employers and their counsel should assess potential EFAA exposure when an arbitration begins—and reassess it when new documents, testimony, or amended allegations introduce a possible sex-based theory.
- Focus on what the employee knew, and when the employee knew it. The Ninth Circuit distinguished between experiencing allegedly offensive conduct and knowing facts that reveal the conduct was based on sex. Employers seeking to establish waiver should preserve a clear chronology of the employee's allegations, discovery responses, document production, deposition testimony, and representations to the arbitrator.
- Plan for the entire case—not just the harassment claim—to move to court. A plausible EFAA claim may bring related discrimination, retaliation, termination, and other claims out of arbitration as well. Employers should account for the possibility of duplicated proceedings, a potentially public court record, expanded discovery, and a jury trial when evaluating litigation budgets and settlement strategy.
The Ninth Circuit's decision does not render employment arbitration agreements meaningless, and it preserves an employer's ability to establish waiver where an employee knowingly pursues a covered claim in arbitration. However, this decision makes clear that initiating arbitration may not always permanently close the courthouse door. For employers, the EFAA must be treated as a continuing case-management issue from the filing of the initial demand through the conclusion of the proceeding.
If your organization has questions about how the EFAA affects your arbitration agreements or pending employment matters, please contact the authors of this article or any attorney in Venable's Labor and Employment Group.