Lawsuit Against SCA Pharmaceuticals Will Test Reach of End Forced Arbitration Act

SCA Pharmaceuticals has filed a motion to compel arbitration in Plaintiff H. Dragon’s sexual harassment and retaliation case—and while the motion fails for several other reasons, this case is among the first to present an interesting legal question about the applicability of the Ending Forced Arbitration Act in sexual harassment cases. 

In its motion, SCA claims that Plaintiff Dragon signed an acknowledgement that he had received the company’s employee handbook, and that the handbook contained language requiring that employment disputes be arbitrated. Plaintiff opposed the motion, pointing out the obvious: the handbook and acknowledgement explicitly disclaimed creating contractual obligations “of any type”—meaning that by SCA’s own choice, no agreement to arbitrate could have been created. Plaintiff also pointed out that any agreement to arbitrate based on those documents would have been illusory, if it had actually existed, since the acknowledgement retains SCA’s authority to alter the policies in its handbook—including any purported arbitration agreement—unilaterally at any time. 

But even though these facts are enough to dispose of the motion, the motion also presented a separate and novel legal issue: does The Ending Forced Arbitration Act (“EFAA”) apply to a hostile work environment claim like this one, where the harassment started before the law came into effect, and continued after it was already effective?  

The EFAA is federal legislation that was signed on March 3, 2022, and it provides that arbitration agreements relating to a sexual assault or sexual harassment dispute are unenforceable. The EFAA states that it applies “with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” Pub. L. No. 117-90, §3, 136 Stat. 26, 28 (2022). In other words, the EFAA is not retroactive. The question that naturally follows for sexual harassment claims is: if the harassment started before March 3, 2022, and continued after that date, when did the claim “accrue?” Was it before the EFAA effective date—meaning arbitration can be compelled—or was it after, meaning that it can’t? 

So far, few federal courts have squarely ruled on this question, and both agree: they found, in conformity with common law tort principles, that a hostile work environment claim keeps accruing as long as the harassment keeps occurring. This type of claim is called a “continuing violation,” and for claims like this, that are composed of an overall course of conduct and not one discrete act, it is “well-settled that those claims accrue on the day of the last act in furtherance of the violation.” Olivieri v. Stifel, 2023 U.S. Dist. LEXIS 57001, *12 (E.D.N.Y. Mar. 31, 2023). The Olivieri court held that consequently, if harassment of the plaintiff started before the EFAA’s effective date and continued after it, the EFAA applies to that claim and prevents arbitration. Id. *13. A Texas federal court this month reached exactly the same conclusion. Watson v. Blaze Media LLC, 2023 U.S. Dist. LEXIS 135694 (N.D. Tex. Aug. 3, 2023). 

Setting aside the fact that the supposed arbitration agreement did not exist in the first place, Mr. Dragon’s case presents an opportunity for what appears to be the third court nationally to rule on this interesting aspect of hostile work environment claims’ accrual and the EFAA. 

The parties briefs can be found here , here and here.  

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