UPDATE: On July 16, 2024, the Court held a hearing on Defendant’s Motion to Compel Arbitration and Dismiss Plaintiff’s Constructive Discharge claims. At the end of the arguments, the Court denied Defendant’s motion in full, and subsequently issued a text Order:
Minute Entry for proceedings held before Judge Robert N. Chatigny: Telephone Conference/Motion Hearing held on 7/16/2024 denying [29] MOTION to Compel Arbitration of Plaintiff’s Amended Complaint and Motion to Dismiss Constructive Discharge Claims filed by SCA Pharmaceuticals, LLC, consistent with the comments made during the telephone conference.
The Court, during the telephone conference, stated in essence that Defendant “could not have it both ways” with respect to its contention that there was a valid and enforceable arbitration agreement situated within an Employee Handbook that specifically disclaimed that it created contractual/legal rights of any kind. In addition, the Court noted that because the employer retained for itself the right to amend or alter the rules in the Handbook at any point, if there were a contract it would be “illusory” and therefore unenforceable. Finding that there was no agreement to arbitrate, the Court did not need to reach the question whether the End Forced Arbitration Act precluded arbitration of any of Plaintiff’s claims, noting any ruling would be dicta, and that the Second Circuit Court of Appeals was poised to rule on the issue in the near future. And the Court refused to dismiss Plaintiff’s Constructive Discharge claim, determining the viability of the claim would be best addressed at summary judgment with a full record of facts.
Plaintiff will finally have his chance to litigate what he alleges was SCA’s failure to stop sexual harassment, as well as his claims of retaliation and constructive discharge, more than two years after he was forced to leave his job.
END UPDATE
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SCA Pharmaceuticals has filed a motion to compel arbitration in Plaintiff H. Dragon’s sexual harassment and retaliation case—and while the motion fails for several other reasons, this case is among the first to present an interesting legal question about the applicability of the Ending Forced Arbitration Act in sexual harassment cases.
In its motion, SCA claims that Plaintiff Dragon signed an acknowledgement that he had received the company’s employee handbook, and that the handbook contained language requiring that employment disputes be arbitrated. Plaintiff opposed the motion, pointing out the obvious: the handbook and acknowledgement explicitly disclaimed creating contractual obligations “of any type”—meaning that by SCA’s own choice, no agreement to arbitrate could have been created. Plaintiff also pointed out that any agreement to arbitrate based on those documents would have been illusory, if it had actually existed, since the acknowledgement retains SCA’s authority to alter the policies in its handbook—including any purported arbitration agreement—unilaterally at any time.
But even though these facts are enough to dispose of the motion, the motion also presented a separate and novel legal issue: does The Ending Forced Arbitration Act (“EFAA”) apply to a hostile work environment claim like this one, where the harassment started before the law came into effect, and continued after it was already effective?
The EFAA is federal legislation that was signed on March 3, 2022, and it provides that arbitration agreements relating to a sexual assault or sexual harassment dispute are unenforceable. The EFAA states that it applies “with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” Pub. L. No. 117-90, §3, 136 Stat. 26, 28 (2022). In other words, the EFAA is not retroactive. The question that naturally follows for sexual harassment claims is: if the harassment started before March 3, 2022, and continued after that date, when did the claim “accrue?” Was it before the EFAA effective date—meaning arbitration can be compelled—or was it after, meaning that it can’t?
So far, few federal courts have squarely ruled on this question, and both agree: they found, in conformity with common law tort principles, that a hostile work environment claim keeps accruing as long as the harassment keeps occurring. This type of claim is called a “continuing violation,” and for claims like this, that are composed of an overall course of conduct and not one discrete act, it is “well-settled that those claims accrue on the day of the last act in furtherance of the violation.” Olivieri v. Stifel, 2023 U.S. Dist. LEXIS 57001, *12 (E.D.N.Y. Mar. 31, 2023). The Olivieri court held that consequently, if harassment of the plaintiff started before the EFAA’s effective date and continued after it, the EFAA applies to that claim and prevents arbitration. Id. *13. A Texas federal court this month reached exactly the same conclusion. Watson v. Blaze Media LLC, 2023 U.S. Dist. LEXIS 135694 (N.D. Tex. Aug. 3, 2023).
Setting aside the fact that the supposed arbitration agreement did not exist in the first place, Mr. Dragon’s case presents an opportunity for what appears to be the third court nationally to rule on this interesting aspect of hostile work environment claims’ accrual and the EFAA.