Can a Sexual Harassment Claim Discovered Mid-Arbitration Force the Entire Case into Court? A Federal Appellate Court Said Yes.

An arbitration agreement usually decides where an employment dispute will be heard. In this case, evidence uncovered during arbitration opened the door to court instead.

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TL;DR: A former executive began arbitrating national-origin and domestic-violence-victim claims. After withdrawing over allegedly late arbitration fees, she filed in court and relied on evidence obtained during and after arbitration to support a sex-based hostile-environment claim. The Ninth Circuit held that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act allowed her to pursue the entire case there.

📄 Read the court’s decision

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A different explanation emerged during discovery

The employee was the CFO of a clinical drug-development company. According to her complaint, the CEO sidelined her, adopted male bankers’ criticism that she was “too aggressive,” questioned whether she could continue working after a domestic-violence incident, and recommended her termination ten days after that incident.

She initially demanded arbitration, asserting discrimination, retaliation, and harassment based on national origin and her status as a domestic-violence victim. During the next year, the parties attended preliminary hearings, began discovery, stipulated to a protective order, and litigated discovery disputes. The dispute eventually reached the Ninth Circuit, which affirmed the denial of the employer’s motion to compel arbitration.

How did a case that had spent more than a year in arbitration end up in court? Discovery changed what the employee believed had happened.

She obtained an email identifying two men as examples of the CEO’s preferred CFO profile. She alleged that the board’s gender-diversity goal led to her hiring despite the CEO’s preference for a man. Discovery also showed that he relied on male bankers’ complaints when recommending her termination.

The employee could invoke the EFAA after arbitration began

The plaintiff withdrew from arbitration after the employer allegedly paid arbitration fees late. She then sued in California state court. The defendants removed the case to federal court and moved to compel arbitration.

The district court denied the motion under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA). The Ninth Circuit affirmed.

The appeals court held that an employee who discovers a basis for a sexual-harassment claim during arbitration may elect under the EFAA to proceed in court. Her original arbitration demand was not an EFAA election because she did not yet know that the alleged mistreatment was based on sex.

The ruling does not create an unlimited exit from arbitration. Waiver may apply if an employee knew of a plausible sexual-harassment claim and intentionally chose arbitration or intentionally delayed asserting the claim.

Nonsexual conduct plausibly supported a harassment claim

The court held that the plaintiff plausibly alleged a sex-based hostile environment under California’s Fair Employment and Housing Act. Taken together, the alleged sidelining, gendered criticism, response to her injuries, and termination supported the claim without sexual advances or sexually explicit comments.

Because the EFAA applies to a “case” relating to a sexual-harassment dispute, the entire case could proceed in court. That conclusion aligns with a 2026 Sixth Circuit decision.

For employers, discovery can change more than the strength of a claim. Newly produced evidence can support a harassment theory that changes where the entire dispute will be heard. Employers and their counsel should reassess arbitrability when discovery changes the nature of the allegations.

A harassment theory may emerge without overtly sexual conduct

Facially nonsexual treatment may support a sex-based hostile-environment claim when viewed in context. Gendered criticism, diminished responsibilities, different treatment, and employment decisions can supply that context even without sexual advances or sexually explicit comments.

The dissent supplies the employer’s argument outside the Ninth Circuit

One judge dissented, viewing more than a year of arbitration activity as an election to remain in that forum. Although nonbinding, the dissent gives employers outside the Ninth Circuit an argument that extensive participation should foreclose a later EFAA election.

A plausible harassment claim can move the entire case

The statute speaks in terms of a case, not an individual claim. Once a qualifying sexual-harassment dispute is plausibly alleged, employers may lose arbitration of accompanying discrimination, retaliation, and other related claims too.

The parties spent more than a year arbitrating. They still ended up in federal court.