[TEST] A plausible sexual harassment allegation bars arbitration of other claims, court says

A single sexual harassment allegation may now be enough to keep an entire lawsuit out of arbitration. In Bruce v. Adams and Reese, LLP, a panel of the U.S. Court of Appeals for the Sixth Circuit held 2-1 that when a complaint plausibly alleges sexual harassment, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act can prevent arbitration of the employee’s entire case, not just the harassment claim.

Congress enacted the EFAA in 2022 in the wake of the #metoo movement. The Act was designed to give employees the option to pursue sexual harassment or sexual assault claims in court rather than being compelled to arbitrate under pre-dispute arbitration agreements.

The lawsuit

Randi Bruce, a paralegal at a law firm’s Nashville Office, alleged that an attorney repeatedly made sexually suggestive comments about her appearance and personal life during workplace conversations and team meetings.

According to the Complaint, the attorney repeatedly suggested that Ms. Bruce should visit clients “in a short skirt,” said “Hoe no” instead of “Oh no” when speaking to her, and commented “how hot” it would be to see her and another paralegal perform sexual acts on his desk.

Ms. Bruce also alleged that the firm failed to accommodate her disabilities and to meaningfully engage in the interactive process. Ms. Bruce alleged that she suffered from several medical conditions, including sleep apnea, insomnia, and post-traumatic stress disorder, and took prescribed sedatives to help her sleep. According to the lawsuit, the sedatives sometimes made it difficult for her to wake up and be at work on time. After several late arrivals, the firm terminated her employment.

Ms. Bruce filed suit, asserting a claim for sexual harassment under Title VII of the Civil Rights Act, as well as claims for violation of the Americans with Disabilities Act. The firm moved to dismiss the sexual harassment claim and sought to compel arbitration of the ADA claims based on an arbitration agreement that Ms. Bruce had signed when she was hired.

The Sixth Circuit decision

The majority on the Sixth Circuit panel denied the motion to dismiss the sexual harassment claim, finding that Ms. Bruce plausibly alleged a hostile work environment under Title VII. The factual allegations in the Complaint were sufficient to create a reasonable inference that the harassment was severe or pervasive. Given her allegations, that is not particularly surprising.

The more noteworthy part of the court’s ruling addressed whether Ms. Bruce could be required to arbitrate her ADA claims.  

The panel majority focused on the language of the EFAA, which provides that arbitration agreements are unenforceable with respect to a “case” relating to a sexual harassment dispute. The majority emphasized that Congress used the word “case,” not “claim.” And because a “case” refers to the entire lawsuit, the court held that once a plaintiff plausibly alleges sexual harassment, the arbitration agreement cannot be enforced against any claims in that lawsuit, even claims that are unrelated to sexual harassment.

As a result, Ms. Bruce’s ADA claims will proceed in court alongside her sexual harassment claim.

The Sixth Circuit is the first appellate court to address this issue under the EFAA, so it remains to be seen whether other courts will adopt the same interpretation. At a minimum, the decision is binding in the Sixth Circuit states of Kentucky, Michigan, Ohio, and Tennessee.

What this means for employers

This decision could significantly affect how arbitration agreements operate in employment disputes that involve sexual harassment allegations:

• A single sexual harassment claim may prevent arbitration of the entire lawsuit.
• Courts may apply the ordinary plausibility standard when determining whether a sexual harassment claim is sufficient to trigger the EFAA. Under this standard, the lawsuit must contain enough factual allegations to allow a court to reasonably infer that the employer could be liable for the alleged harassment. The employee is not required to prove her claim at this early stage.
• Employers may face expanded litigation exposure when sexual harassment allegations are included in a lawsuit, even if the arbitration agreement would otherwise cover the dispute.

For employers who have arbitration agreements with employees, the ruling highlights the importance of carefully evaluating litigation strategy and early motion practice when sexual harassment claims are asserted.