Federal Court Applies the EFAA to Bar Arbitration in Sexual Harassment Case
A recent decision from the Southern District of New York offers an important reminder of how the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) continues to reshape the arbitration landscape — particularly in employment disputes that involve allegations of sexual misconduct. In Kelly v. Rosenberg & Estis, P.C. (S.D.N.Y. Sept. 23, 2025), a federal district court held that the EFAA barred enforcement of an arbitration agreement in a lawsuit that included a claim for sexual harassment.
What Is the EFAA?
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 — often referred to simply as the EFAA — amended the Federal Arbitration Act (FAA) to give employees and consumers the right to reject mandatory arbitration when their claims involve sexual harassment or sexual assault.
Before the EFAA, many employment contracts required binding arbitration of virtually all disputes, including those based on workplace misconduct. The 2021 law fundamentally changed that. Now, when a plaintiff brings a qualifying claim, they can elect to proceed in court instead of arbitration, even if they previously agreed to arbitrate all employment-related issues.
Congress’s purpose in enacting the EFAA was to ensure that individuals alleging sexual harassment or assault would not be forced into private arbitration — where proceedings are confidential and results rarely become public — and instead have the opportunity to pursue their claims openly in court.
But as courts are now making clear, the statute’s reach goes even further. The EFAA provides that a pre-dispute arbitration agreement is unenforceable with respect to any “case which relates to” a sexual harassment or assault dispute. The phrase “case which relates to” is proving to be pivotal. It has allowed judges to interpret the law broadly — extending its protection to entire cases, not merely to the harassment claims themselves.
That is exactly what happened in Kelly v. Rosenberg & Estis.
This ruling underscores a growing trend: when a sexual harassment claim appears anywhere within a case, courts are increasingly reluctant to compel arbitration of any related claims — even those traditionally subject to binding arbitration under the FAA.
The Background: A Clerk, a Contract, and a Clause
The plaintiff in Kelly worked as a law clerk at a prominent New York firm. Like many employees, she signed an arbitration agreement as a condition of her employment. The agreement broadly required her to resolve all employment-related disputes through binding arbitration.
Her lawsuit, however, alleged far more than routine workplace conflict. According to the complaint, several firm partners and staff made repeated sexual comments about her appearance and personal life — including comparisons to television characters known for sexualized portrayals. One partner even quipped, “Now don’t go filing a sexual harassment claim on me,” when she objected to his flirtatious remarks.
The clerk ultimately brought suit in New York Supreme Court, alleging gender discrimination, disability discrimination, unequal pay, and retaliation. After the defendants removed the case to federal court and moved to compel arbitration, she amended her complaint to add explicit sexual harassment claims, arguing that the EFAA rendered the arbitration agreement unenforceable.
The Court’s Decision: The EFAA Applies — and It Applies Broadly
Judge McMahon’s opinion methodically applied the EFAA and rejected the firm’s motion to compel arbitration. The decision turned on several interlocking points that are worth unpacking.
1. The EFAA Creates a Carve-Out to the FAA
The Federal Arbitration Act remains the default rule governing enforcement of arbitration agreements. But Congress created a clear exception in 2021: when a plaintiff raises claims of sexual harassment or sexual assault, any pre-dispute arbitration clause may be invalidated at the plaintiff’s election. The EFAA expressly provides that a pre-dispute arbitration agreement “shall be unenforceable with respect to a case which relates to a sexual harassment dispute.”
2. “Case” Means the Entire Proceeding — Not Just the Claim
The defendants argued that even if the plaintiff’s sexual harassment claim was exempt from arbitration, her other claims (such as gender discrimination and unequal pay) should still proceed in arbitration. The court disagreed.
Focusing on Congress’s use of the word “case” rather than “claim,” the court concluded that the EFAA’s language was both deliberate and unambiguous. By referring to the case as the relevant unit of analysis, Congress intended for an entire legal proceeding to remain in court whenever it contains a sexual harassment or assault claim. In other words, once a qualifying claim appears in the mix, the arbitration agreement falls away — for all claims, not just the misconduct-based ones.
3. The Plaintiff Plausibly Alleged Sexual Harassment Under the NYCHRL
The court next considered whether the plaintiff had plausibly alleged sexual harassment sufficient to trigger the EFAA. Because the New York City Human Rights Law (NYCHRL) sets one of the most plaintiff-friendly standards in the nation, the court used that framework to test plausibility. Under the NYCHRL, a plaintiff need only show that she was treated less well than others because of gender, or subjected to unwelcome gender-based conduct.
Citing the New York City Commission on Human Rights’ definition of sexual harassment — which includes “offensive and suggestive comments” and “asking about a person’s sex life or making sexualized remarks” — the court found the complaint easily cleared that bar. The alleged remarks were not mere workplace banter but recurring, gender-based comments that created an objectively harassing environment.
4. The Harassment Claim Enveloped All Other Claims
Finally, the court distinguished its decision from Mera v. SA Hospitality Group (S.D.N.Y. 2023). In Mera, the court held that the EFAA applied to the plaintiff’s sexual harassment claims but not to unrelated wage claims. Here, by contrast, the court found that the clerk’s claims for discrimination, retaliation, hostile work environment, and unequal pay were all “directly and obviously related” to her sexual harassment allegations. Even her disability discrimination claims, though less tightly connected, were arguably related to her treatment in the same hostile environment. That nexus was enough to keep the entire case in court.
Why This Case Matters for Arbitration Practitioners
For arbitrators, Kelly provides a clear snapshot of how courts are interpreting the EFAA — and it carries meaningful implications for how practitioners approach employment cases.
1. “Case” vs. “Claim” Is the New Battleground
The statutory choice of “case” over “claim” continues to be the linchpin in post-EFAA litigation. Courts like the Kelly court are reading the EFAA expansively, emphasizing Congress’s intent to empower employees to avoid arbitration altogether when sexual harassment or assault is alleged. Arbitrators and advocates alike should expect this argument to arise wherever even a single harassment-based count is included among broader employment claims.
2. The EFAA’s Reach Extends Beyond Federal Claims
Notably, Kelly relied on a state and municipal definition of sexual harassment (the NYCHRL) to determine whether the EFAA applied. That approach signals that a plaintiff need not invoke federal law (such as Title VII) to trigger the statute. Any sufficiently pled sexual harassment claim — whether under state, local, or common law — may suffice. Practitioners should therefore pay careful attention to how local statutes define harassment when assessing the enforceability of arbitration agreements.
3. Employers May See the Scope of Arbitration Narrowing
Employers and defense counsel should view Kelly as a cautionary tale. The court’s reasoning suggests that once a plaintiff asserts a colorable sexual harassment claim, the arbitration clause is effectively neutralized. Attempting to sever the harassment count from other claims may no longer be viable. The practical effect is a substantial curtailment of arbitration in employment disputes — especially those involving overlapping discrimination or retaliation issues.
4. Arbitrators Should Expect Fewer (and More Targeted) Employment Filings
For arbitrators, this evolving jurisprudence may subtly change the profile of employment disputes reaching arbitration. Cases that once entered arbitration under broad “all disputes” clauses may now remain in court if any sexual harassment allegations surface. The remaining arbitration docket may skew more heavily toward purely contractual disputes, wage issues, or claims unrelated to workplace conduct.
The Broader Message: Arbitration Remains Vital — But Boundaries Matter
The Kelly decision does not diminish the fundamental role of arbitration in resolving complex disputes. It does, however, underscore the importance of thoughtful drafting, informed consent, and the preservation of party choice. Arbitration remains an essential tool for achieving efficient, balanced outcomes — particularly when conducted by experienced neutrals who value fairness and clear process.
Still, Kelly and similar rulings remind us that arbitration is a creature of contract, bounded by statute. Congress has spoken clearly that sexual harassment and sexual assault claims are to be treated differently. Whether one views that as a policy correction or a structural overreach, the practical reality is the same: courts are interpreting the EFAA broadly, and arbitration agreements that once seemed airtight may now contain statutory escape hatches.
Closing Thought
The EFAA’s impact will continue to unfold through cases like Kelly. For attorneys and clients alike, this makes careful analysis at the intake stage critical — not just to anticipate procedural strategy, but to understand whether arbitration is even an available path.
At Nationwide ADR, we remain committed to the integrity of the arbitration process and to fostering dispute resolution environments where all parties are heard, respected, and treated with fairness. Whether through arbitration, mediation, or early dispute resolution, the goal remains the same: to unlock solutions for demanding cases — with clarity, balance, and resolution at the forefront.
Trusted. Balanced. Resolution Driven.