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Even employee claims of sexual harassment that occurred before the effective date of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA) may end up in court. In Olivieri v. Stifel, Nicolaus & Co., the Second Circuit Court of Appeals held that acts occurring before the effective date of the EFAA can be deemed to be part and parcel with acts occurring after the effective date–so that all of the claims accrue as of the later date and are subject to the EFAA.

What happened

Patricia Olivieri filed suit against her employer Stifel, Nicolaus & Co. (Stifel) and several coworkers in 2021 alleging gender-based discrimination, hostile work environment and retaliation claims under Title VII and the New York State Human Rights Law (NYSHL). Olivieri alleged her manager sexually assaulted and repeatedly sexually harassed her, and that after she reported her manager to the company, the defendants allegedly subjected her to a hostile work environment characterized by discrimination and retaliation.

Stifel moved to compel arbitration of Olivieri’s claims based on an arbitration clause in the plaintiff’s employment agreement. The US District Court for the Eastern District of New York initially granted Stifel’s motion to compel in late March 2022, not having been made aware of the enactment of the EFAA on March 3, 2022 by any party. (The EFAA allows a plaintiff alleging sexual harassment or sexual assault to void a pre-dispute arbitration agreement at their discretion. Claims under the EFAA accrue “on or after” March 3, 2022.) In light of the EFAA, Olivieri subsequently moved for reconsideration of the district court’s order requiring her to arbitrate her claims, and the district court turned course, vacating its prior decision and denying the employer’s motion to compel arbitration. The district court concluded that the plaintiff’s hostile work environment claims–which alleged a hostile work environment and retaliation both before and after the effective date of the EFAA–were subject to the continuing violation doctrine of accrual and accrued after the EFAA’s effective date. Therefore, the EFAA applied to allow the plaintiff to void her pre-dispute arbitration agreement. On appeal, a three-judge panel of the Second Circuit unanimously affirmed.

What the Court said

Hostile work environment claims accrue and “reaccrue” under the continuing violation doctrine

effective date. The Court said pursuant to the continuing violation doctrine, which applies to hostile work environment claims under both Title VII and the NYSHRL, a claim first accrues when the plaintiff has an actionable claim. However, because a hostile work environment claim is a single, indivisible claim arising from numerous acts undertaken in a continuing course, the claim reaccrues–meaning it is essentially reborn–with each successive act that is part of that continuing course. Thus, such claims have multiple accrual dates. And if an act contributing to the hostile work environment occurs within the filing period, the hostile work environment claim is timely, and a defendant can be liable for the entire time period of the hostile work environment–including the period falling outside of the limitations period.

The Court held that under the continuing violation doctrine, the plaintiff’s claims accrued both before the EFAA was enacted, and reaccrued with each successive act that was part of the single continuing course of conduct underlying the hostile work environment claims. Therefore, the plaintiff’s retaliatory hostile work environment claims accrued after March 3, 2022, and the EFAA applied.

Retaliation reasonably related to “sexual harassment dispute” under EFAA

The defendants also argued that Olivieri’s retaliation claims were not covered by the EFAA because they did not fall within the definition of a “sexual harassment dispute” under the EFAA–defined as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” The Court disagreed, finding that retaliation resulting from a report of sexual harassment is related to conduct alleged to constitute sexual harassment, and therefore is a “sexual harassment dispute.”

Claim splitting

In addition, the defendants argued that even if the EFAA did apply to Olivieri’s retaliation-based hostile work environment claims, the EFAA did not reach Olivieri’s assault and sexual harassment claims that predated the enactment of the EFAA. Since the argument was raised for the first time in the defendants’ reply brief, the Court deemed the argument abandoned. However, in a footnote, the Court explained that other courts have addressed the question–including Johnson v. Everyrealm, Inc., a case in the US District Court for the Southern District of New York in which the court held that where a claim in a case alleges “conduct constituting a sexual harassment dispute” under the EFAA, the EFAA (at the election of the party making the allegation) makes pre-dispute arbitration agreements unenforceable with respect to the entire case relating to that dispute.

Takeaways

  • Though the Court determined that retaliation resulting from reporting sexual harassment is a “sexual harassment dispute” for purposes of the EFAA, what else is–or isn’t–a “sexual harassment dispute,” including claims of disparate treatment or gender discrimination–remains an open question. Employers should monitor this issue as case law develops.
  • Employers should track how courts address claim-splitting arguments, and whether some courts subject claims that are based on acts predating the effective date of the EFAA to arbitration–which could result in a patchwork landscape for employers facing sexual harassment and assault claims.
  • Since claims of sexual harassment or sexual assault based on activity occurring pre-EFAA could be decided in arbitration (at the discretion of the employee), employers might consider carving such claims out of arbitration policies entirely. This would allow employers and employees to discuss and mutually decide on arbitration on a case-by-case basis, rather than leaving the decision solely to the employee.
  • Employers should be proactive regarding risk management in the workplace by taking measures such as implementing effective training programs and clear, accessible reporting channels.  Sexual harassment complaints must be taken seriously and addressed quickly, and employers should establish a zero-tolerance policy regarding retaliation against employees who report harassment.
  • Employers should work with counsel to engage in strategic litigation planning in sexual harassment cases, including thoughtfully evaluating the timing of claims, considering the relevance of the continuing violation doctrine, and determining the possible effects of recent legislative changes such as the EFAA.