Can you compel arbitration with an employee who is alleging sexual harassment? You may recall that in 2022, Congress enacted the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA), which precludes employers from requiring employees to arbitrate sexual harassment claims. But what if the alleged harassment occurred before the EFAA effective date? A recent Sixth Circuit opinion, Memmer v. United Wholesale Mortgage, LLC, answered this question.
EFAA Background
Congress passed the EFAA on the heels of the #MeToo movement, which highlighted that arbitration could be used to hinder public awareness of sexual harassment claims and potentially deter employees from pursuing claims, including class actions. Under the EFAA, an employee may voluntarily agree to proceed with arbitration of a sexual harassment claim, but an employer cannot compel as much.
The EFAA applies “with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act [March 3, 2022].”
But what does this language actually mean? Is it possible for the EFAA to apply to an instance of sexual harassment that occurred prior to March 3, 2022? If the employee left employment before the effective date, can you compel arbitration?
The Memmer Decision Sheds Some Light
Kassandra Memmer quit her job several months before the enactment date of the EFAA and filed a lawsuit alleging a variety of discrimination claims, including sexual harassment. Given her termination date, the alleged harassment occurred prior to March 3, 2022. Not surprisingly, the defendant moved to compel arbitration based on a valid agreement, arguing that the EFAA did not apply to the plaintiff’s claims. The district court agreed, and Memmer appealed.
The majority opinion, authored by Judge Karen Moore and joined by Judge Eric Clay, focused on the EFAA’s language in a statutory note, specifically Congress’s disjunctive language choice, “dispute or claim.” Given Congress’s use of both words, the Court held it had to ascribe a separate meaning to each word. On the one hand, a “claim” accrues when the cause of action accrues, meaning certain elements are in place to form an injury or legal claim ripe for vindication. As for the word “dispute,” the Court held that there is no “set legal framework” to determine when a dispute arises. Instead, the question involves determining exactly when the parties became adverse to one another.
By giving distinct meanings to the words “dispute” and “claim,” the Court held that even though the plaintiff’s claims accrued prior to the enactment date of the act, the dispute between the parties may have transpired after the enactment date of the EFAA. Accordingly, the Court remanded to the district court for consideration of exactly when the dispute arose between the parties.
Based on the Memmer case, employers who seek to compel arbitration of sexual harassment claims cannot rely only on the employee’s separation date. Instead, an employer must also consider when the dispute arose, or when some type of opposition between the parties transpired. The operative dates could be when the employee complains of harassment, when the employer investigates (or does not investigate) the sexual harassment complaint, when the plaintiff files an EEOC charge, or even when the plaintiff files a lawsuit. In the words of the Sixth Circuit, “[u]ltimately, when a dispute arises is a fact-dependent inquiry” that depends on the specific context of each case.