The Second Circuit Joins Fellow Circuits in Extending Limitations on Mandatory Arbitration Agreements

On September 30, 2026, the U.S. Court of Appeals for the Second Circuit joined the Sixth and Ninth Circuits in their interpretation of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act’s (EFAA) scope.

In Diaz-Roa v. Hermes Law, P.C., the court extended the developing consensus view that a plaintiff who includes a “claim” of sexual assault or sexual harassment in their complaint extends the statute’s invalidation of an existing agreement to arbitrate every claim in the lawsuit—in other words, the entire “case.”

Congress amended the Federal Arbitration Act with passage of the EFAA in 2022 in response to the #MeToo movement. At the election of a person alleging conduct constituting a sexual harassment or sexual assault dispute, no predispute arbitration agreement “shall be valid or enforceable with respect to a case” which is filed under applicable law relating to the dispute. Since then, several courts have encountered questions regarding the applicability of the EFAA to other related (and unrelated) claims raised in the same action.

In Diaz-Roa, the plaintiff, a former executive at a legal tech company, sued her former employers after it discharged her upon expressing an interest in exercising stock options. Defendants did not contest that Plaintiff’s allegations that coworkers fixated on her appearance, made inappropriate comments about her sex, and told her to flirt with clients to win business properly pled a sexual harassment dispute under the EFAA. At issue before the Second Circuit was whether her other claims—breach of contract, tortious interference with contract, conversion and New York Labor Law violations, which related only to her stock options—could similarly avoid arbitration.

Diaz-Roa filed her claims in the U.S. District Court for the Southern District of New York. The district court denied Defendants’ motion to compel arbitration, holding that the EFAA voided the arbitration agreement for all claims asserted in the same case. This appeal ensued, arguing that the EFAA’s application to the sexual harassment claims should not extend to unrelated stock option claims, which had nothing to do with the alleged sex-based conduct. Disagreeing with Defendants, the Second Circuit affirmed the lower court based solely on its analysis of the statutory text. Relying on the law’s plain language, the Second Circuit found that the phrase “case” means all claims brought together in one lawsuit, not just the individual claims related to sexual assault or sexual harassment. Accordingly, it held that the EFAA applied to all Diaz-Roa’s claims, including the stock option claims.

This is not the only ambiguity in the EFAA that has been stirring in federal courts across the country, and more major decisions related to the law are upcoming. For example, courts have reached different conclusions on whether a plaintiff must describe sexual assault or sexual harassment in enough detail to meet federal pleading standards, or whether the claims need only be non-frivolous. Courts are also deciding whether the EFAA applies more broadly to sex-based conduct, i.e., discrimination based on sex, or only to claims involving sexual conduct. Decisions on the latter issue are currently pending in both the Second and Ninth Circuits.

Employers with arbitration agreements should be aware of the EFAA’s broad reach, as Diaz-Roa confirms. Contract, tort or other claims that are otherwise unrelated to sex or sexual conduct may proceed in in open court if alleged in the “case” along with allegations of sexual assault or sexual harassment. Finally, be on the lookout for updates from EBG regarding the Court of Appeals decisions related to other open issues related to the EFAA, all of which could continue to broaden the scope of the statute’s application.

Staff Attorney Elizabeth A. Ledkovsky assisted with this blog post.

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The Workforce Bulletin blog is currently edited by Adam S. Forman, Greta Ravitsky, Elizabeth S. Torkelsen, and Jennifer Stefanick Barna.