Trial News

A hostile work environment claim involving allegations of sexual assault and sexual harassment is not subject to forced arbitration, even though the plaintiff filed it before the enactment of a federal law prohibiting forced arbitration in such claims, the Second Circuit has ruled. The “continuing violation” doctrine applies to the plaintiff’s claims because the defendants’ actions were ongoing after the law—the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA)— became effective, and the claims “reaccrued” with each successive act. (Olivieri v. Stifel, Nicolaus & Co., Inc., No. 23-658-cv (2d Cir. Aug. 12, 2024).)

Patricia Olivieri alleged that her manager at Stifel, Nicolaus & Co. sexually assaulted and sexually harassed her. She claimed that he made sexual comments to her starting in 2018 and touched her inappropriately on at least one occasion. She reported the manager’s behavior to the company, which did not take any action and then began discriminating and retaliating against her. After returning from maternity leave, Olivieri alleged the company delayed her request for accommodations, withheld pay, and changed her role.

Olivieri brought claims under the New York State Human Rights Law and Title VII of the Civil Rights Act of 1964 against the company and the manager individually. The defendants moved to compel arbitration of Olivieri’s claims based on a forced arbitration clause in her employment agreement. The Eastern District of New York granted the motion.

However, a few weeks earlier while the motion was still pending, Congress had enacted the EFAA. The new law, which was in effect when the court made its ruling on the motion to compel, prohibits employers from mandating arbitration for disputes involving sexual assault or sexual harassment. The EFAA amended the Federal Arbitration Act, and employees who signed employment agreements with pre-dispute mandatory arbitration clauses now have the option to bring their claims in court instead. The EFAA applies to “any dispute or claim that accrues on or after” its effective date of March 3, 2022.

Olivieri moved to amend her complaint and requested that the district court reconsider its decision on the motion to compel arbitration in light of the EFAA. On reconsideration, the district court vacated its earlier grant of the motion to compel arbitration, finding that the plaintiff’s claims had accrued after the EFAA went into effect and therefore the statute applies. The defendant appealed to the Second Circuit. AAJ filed amicus briefs jointly with Public Justice and the New York Chapter of the National Employment Lawyers Association in support of the plaintiff at the district and circuit court levels.

The Second Circuit affirmed, finding that under the “continuing violation” doctrine, the plaintiff’s hostile work environment claims accrued after the statute became effective. The court noted that the term “accrue” in the EFAA is the same as its meaning for statutes of limitations—that a plaintiff’s claim “runs from the time of the last act in the continuing course of discriminatory or retaliatory conduct.” It noted that the way a statute of limitations begins to run differs for the type of claim involved and whether it is the result of one individual act or part of a series of actions, which would be subject to the continuing violation doctrine. In these situations, “causes of action accrue serially” and constitute “an exception to how accrual normally works.” Rather than accruing at a single point in time—such as when the injurious act happens or when the plaintiff “discovered” or should have known about a defendant’s misconduct—these causes of action are “composed of a series of separate acts that collectively constitute one ‘unlawful . . . practice.’”

Here, although the defendants’ alleged misconduct began before the EFAA’s effective date, it continued after that date and therefore accrued once the EFAA was in effect. “In the context of claims subject to the continuing violation doctrine, a claim first accrues when the plaintiff has an actionable claim; but because such a claim is a single and indivisible claim arising from numerous specific acts undertaken in a continuing course, the claim reaccrues . . . with each successive act that is part of that continuing course,” the Second Circuit explained.

Hostile work environment claims fall within the continuing violation doctrine “because, unlike discrete acts, [t]heir very nature involves repeated conduct.” The court reasoned that although Olivieri’s claims initially accrued before the EFAA was enacted, they continued to accrue (or reaccrue) with each new act that was part of the ongoing hostile work environment. Because the alleged retaliatory acts occurring after the EFAA’s effective date were part of the same course of conduct, Olivieri’s claims were deemed to have accrued after March 3, 2022. Therefore, the court concluded that all of her claims were subject to the EFAA, and she could not be forced into arbitration.

The court rejected the defendants’ assertion that a claim’s accrual date should be tied to the date it first accrued, emphasizing that “if Congress wanted the EFAA to apply only to claims that ‘first’ accrue after its enactment, it could have said so.” The court also disagreed that this interpretation of “accrue” would lead to “absurd results” or retroactive application of the law. It noted that the U.S. Supreme Court has consistently held that hostile work environment claims fall within the continuing violation doctrine, and that if the alleged misconduct is still happening after the law was enacted, it cannot logically be said that it is being applied retroactively.

New York City attorney David Gottlieb, who represented the plaintiff, said, “This is the first decision by any federal appellate court in the country confirming this breadth of the EFAA’s reach. We stand with all sexual harassment victims and their right to be free from forced arbitration.”