Arbitration agreements are a powerful tool used by many employers to compel the utilization of arbitration as a means of alternative dispute resolution. Arbitration allows the parties of a claim to resolve the dispute privately, without involvement of a court of law. The Federal Arbitration Act (FAA) strongly favors arbitration and allows courts to stay the proceedings of any claims subject to valid and enforceable arbitration agreement and to compel the parties to binding arbitration.

In March 2022, Congress enacted the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFAA” or the “Act”). The Act became effective immediately and amended the FAA to specify that victims of sexual assault or harassment can pursue those claims (and related ones) in court, even if they are bound by an arbitration agreement. Accordingly, as a result of the EFAA, arbitration agreements became unenforceable as to sexual assault and sexual harassment claims, and such claimants cannot be compelled to arbitrate their claims.

In light of the EFAA, the United States District Court for the District of New Jersey, in Cornelius v. CVS Pharmacy, LLC, analyzed the enforceability of arbitration agreements as they relate to claims of sex discrimination. The District of New Jersey determined that the EFAA does not apply to sex discrimination claims and, accordingly, courts must stay sex discrimination claims subject to a valid arbitration agreement and compel them to arbitration. In reaching its decision, the District of New Jersey highlighted the distinction between sexual harassment and sex discrimination claims for the purposes of the EFAA, holding that allegations of unwelcomed sexual advances or behavior motivated by sexual desire are required for exclusion from arbitration under the EFAA.

FACTS

Michelle Cornelius worked as a Casher at CVS for nearly 40 years. Cornelius alleged that, in or about 2018, her male supervisor began to target her with “severe and pervasive negative treatment, intentionally because she is a woman.” Cornielius’s allegations include a litany of disrespectful and demeaning behavior, spanning multiple years, and culminating in her eventual resignation. However, Cornelius made no allegations of unwelcomed sexual advances by her supervisor and did not allege that his behavior was motivated by sexual desire. Furthermore, Cornelius, in her Complaint, did not specifically allege sexual harassment under federal or state law.

Notwithstanding, Cornelius argued that because her supervisor’s allegedly hostile behavior toward her was based on her gender, that his conduct constitutes sexual harassment under Title VII. In support of her position, Cornelius relied on caselaw stating “harassment might be present where there is no sexual attraction but where the harasser displays hostility to the presence of a particular sex in the workplace.”

The District Court's Decision

The District Court disagreed, noting that the phrases “harassment” and “discrimination”, in some contexts, are used interchangeably, but that “harassment on the basis of sex does not automatically convert a sex discrimination claim to a sexual harassment claim. Rather the District Court reiterated the distinction articulated by the Third Circuit in Friel v. Mnuchin: “Sex discrimination is discriminating against someone because of his or her sex, while sexual harassment is unwelcome sexual advances or other verbal or physical contact of a sexual nature.” Consistent with this distinction, the District Court held that, without specific allegations of sexual harassment, unwelcomed sexual advances or behavior motivated by sexual desire, sex discrimination claims cannot be considered sexual harassment claims, and therefore are not subject to exclusion from arbitration under the EFAA.

Bottom Line

While the EFAA precludes the forced arbitration of sexual assault and sexual harassment claims, the EFAA is not extended to include strictly sex discrimination claims. In the context of a sex discrimination claim, without additional facts to support a sexual assault or sexual harassment claim, a valid and enforceable arbitration agreements may be utilized to compel the matter to arbitration. It is also important to note that states, including New Jersey, have state laws governing the validity of arbitration agreements and the waiver of particular claims. It remains unclear what effect, if any, the EFAA will have on those state laws. However, arbitration agreements prove to remain a useful tool to resolve disputes privately and without litigation in a court of law, that all employers should consider.