All or Nothing? Second Circuit Clarifies Scope of Sexual Harassment Arbitration Law (US)
A recent decision by the United States Court of Appeals for the Second Circuit clarified the reach of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA”), with significant implications for employers in New York, Connecticut, and Vermont seeking to enforce arbitration agreements.
On September 30, 2026, in Diaz-Roa v. Hermes Law, P.C.,[i], the Second Circuit held that when an employee properly invokes the EFAA, a pre-dispute arbitration agreement is unenforceable as to the entire lawsuit, not just the sexual harassment or sexual assault claims. That means other claims brought in the same lawsuit – even claims entirely unrelated to sexual harassment or sexual assault – must also proceed in court rather than arbitration.
The EFAA
Enacted in March 2022, the EFAA amended the Federal Arbitration Act (“FAA”) to allow individuals alleging sexual harassment or sexual assault claims to elect to invalidate pre-dispute arbitration agreements and pursue their claims in court. The EFAA provides that such agreements are unenforceable with respect to a “case” that relates to a sexual harassment or sexual assault dispute.
But one important question left unanswered by the EFAA was what happens when an employee brings sexual harassment or sexual abuse claims alongside other, unrelated claims? Is the entire arbitration agreement invalidated, or does the EFAA only extend to the harassment and abuse claims, meaning that all other claims can be subject to arbitration? That was the question before the Second Circuit.
Case Background
The dispute in Diaz-Roa involved a former employee of Hermes Law, P.C. an executive at its affiliated legal technology company, ClaimDeck, Following her termination, Diaz-Roa alleged that her employer terminated her employment to prevent her from exercising stock options valued at more than $ 1 million. She also alleged that she had experienced sexual harassment during her employment.
Diaz-Roa filed suit in the United States District Court for the Southern District of New York, asserting sexual harassment claims under New York state and city law, along with several non-harassment claims relating to her termination and stock options.
The defendants sought to compel arbitration pursuant to an arbitration agreement Diaz-Roa previously signed under which she agreed to arbitrate employment related claims against her employers. The Southern District denied the motion to compel arbitration, finding that the EFAA rendered the arbitration agreement unenforceable as to the entire lawsuit. The defendant employers appealed.
The Second Circuit’s Decision
Although the district court dismissed several of Diaz-Roa’s claims, her sexual harassment and conversion claims remained. The defendants argued that the non-harassment conversion claim should be resolved through arbitration. However, the Second Circuit disagreed, holding that the EFAA’s reference to a “case” encompasses an entire lawsuit rather than individual causes of action.
The Second Circuit emphasized that Congress used the term “case,” rather than “claim,” in Section 402(a) of the EFAA. According to the Court, that distinction reflected Congress’ intent to permit plaintiffs who properly invoke the EFAA to avoid arbitration for all claims within a lawsuit, even where certain claims do not independently relate to sexual harassment or sexual assault.
The Second Circuit also rejected the defendants’ argument that the FAA’s general policy favoring arbitration required a narrower interpretation. Instead, it concluded that Congress expressly created an exception to the enforceability of pre-dispute arbitration agreements through the EFAA.
In reaching its decision, the Second Circuit joined the Sixth and Ninth Circuits,[ii] both of which similarly concluded that the EFAA applies to an entire lawsuit rather than only its sexual harassment or sexual assault claims.
The Second Circuit nevertheless left certain questions unresolved, including the pleading standard necessary to invoke the EFAA and how the statute applies in certain class, collective, or multi-plaintiff actions.
What this Means for Employers
This decision has significant implications for employers operating within the Second Circuit that rely on mandatory arbitration agreements to resolve employment-related disputes.
Under the Second Circuit’s interpretation, employers may be unable to compel arbitration of otherwise arbitrable employment claims when those claims are included in a lawsuit that includes sexual harassment or assault claims. This may include claims involving compensation, contracts, or other employment disputes that do not independently concern sexual harassment or sexual assault.
Importantly, the decision does not invalidate employment arbitration agreements generally. Rather, it clarifies the scope of the EFAA’s exception when the statute applies. The Second Circuit also recognized that ordinary procedural rules governing the joinder of claims and parties continue to limit which claims may properly be included in a single lawsuit.
Employers may wish to review their existing arbitration agreements and dispute resolution practices in light of this decision, particularly where employees assert sexual harassment or sexual assault claims alongside other employment-related causes of action. As courts continue to interpret the scope of the EFAA, employers should remain mindful of how sexual harassment or sexual assault claims may affect the enforceability of their arbitration agreements.
Employers seeking guidance on reviewing their arbitration agreements or navigating employment-related disputes in light of this recent decision should contact Squire Patton Boggs (US) LLP’s Labor & Employment team.
[i] No. 24-3223-cv(2d Cir. Sept. 30, 2026).
[ii] See Bruce v. Adams & Reese, LLP, 168 F.4th 367 (6th Cir. 2026); Ding v. Structure Therapeutics, Inc., No. 25-1532 (9th Cir. Aug. 19, 2026).