Second Circuit Ruling Clarifies Reach of EFAA Under Continuing Violation Doctrine in Sexual Harassment Cases

Quick Hits

• The Second Circuit Court of Appeals held that for claims subject to the “continuing violation doctrine,” such as hostile work environment claims, accrual occurs with each new act that is part of the ongoing pattern of misconduct.
• Because the plaintiff alleged retaliatory acts occurring after March 3, 2022, her claims were found to have “accrued” after the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act’s effective date, making them subject to the new law.
• The court rejected arguments that this interpretation would lead to impermissible retroactive application of the law.
• The court held that the plaintiff’s retaliation claims related to conduct that is alleged to constitute a “sexual harassment dispute” and therefore subject to the EFAA.

Background

On March 3, 2022, President Biden signed into law the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA), which prohibits employers from mandating arbitration for disputes involving sexual assault or harassment. The EFAA amended the Federal Arbitration Act (FAA), which provides that arbitration agreements, similar to other contracts, “shall be valid, irrevocable and enforceable.” Prior to the EFAA, federal policy strongly favored arbitration as an alternative dispute resolution process in all types of employment disputes.

However, under the EFAA, employees who sign employment arbitration agreements now have the option to bring their claims in state, federal, or tribal courts, if they prefer to avoid arbitration. The EFAA applies with respect to “any dispute or claim that accrues on or after” the effective date (i.e., March 3, 2022).

Analysis

The case of Olivieri v. Stifel, Nicolaus & Co., Inc., centered on whether Patricia Olivieri’s sexual harassment and retaliation claims against her employer were subject to arbitration or could proceed in federal court under the EFAA. Olivieri sued her employer alleging sexual harassment and assault by her manager and subsequent retaliation. She filed her complaint in January 2021, before the EFAA was enacted. However, in a second amended complaint, Olivieri alleged that she continued to experience a retaliatory hostile work environment after the EFAA was enacted.

In holding that the EFAA applied, the Second Circuit focused on the concept of “accrual” in the context of hostile work environment claims and the continuing violation doctrine. It explained that such claims “accrue” and “reaccrue” with each successive act that is collectively part of the “singular unlawful practice.” The court reasoned that while Olivieri’s claims did initially accrue before the EFAA was enacted, they continued to accrue (or reaccrue) with each new act that was part of the ongoing hostile work environment. Because Olivieri alleged retaliatory acts occurring after the EFAA’s effective date that were part of the same course of conduct, her claim was deemed to have accrued after March 3, 2022. Accordingly, the court concluded that all of Olivieri’s claims were subject to the EFAA, even though some of the alleged misconduct predated the law.

In doing so, the court rejected the argument that retaliation claims fall outside the EFAA’s definition of a “sexual harassment dispute,” and clarified that retaliation resulting from a report of sexual harassment is “relat[ed] to conduct that is alleged to constitute sexual harassment” under the act.

At the same time, the court declined to address the employer’s claim-splitting argument, specifically that Olivieri’s underlying assault and harassment claims should be split off and resolved in arbitration.

The court also rejected arguments that this interpretation of “accrue” would lead to “absurd results” or retroactive application of the law, emphasizing that it aligned with established principles of how hostile work environment claims operate under statute-of-limitations analyses.

Takeaways and Open Questions

The Second Circuit’s opinion provides several takeaways, but it leaves several open questions for employers.

Under the continuing violation doctrine, pre-enactment conduct that forms the basis of a hostile work environment claim may be subject to the EFAA if the same course of conduct continued after the effective date.

Retaliation claims may be deemed related to a “sexual harassment dispute” under the EFAA.

The court left open the question of whether pre-enactment discrete acts or claims unrelated to a “sexual harassment dispute” could be split off or bifurcated and compelled to arbitration. Similarly, and of potentially greater significance going forward, the court did not resolve whether claims such as gender discrimination or disparate treatment relate to a “sexual harassment dispute.”

Ogletree Deakins’ New York office will continue to monitor developments and will provide updates on the Arbitration and Alternative Dispute Resolution, Employment Law, and State Developments blogs as new information becomes available.

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