Sexual Orientation Harassment Blocks Forced Arbitration

Takeaway: Employers should not assume an arbitration agreement will keep workplace disputes out of court simply because a complaint includes multiple claims. When an employee plausibly alleges sexual harassment under California law, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA) may remove the entire case from arbitration. HR professionals should treat complaints involving harassment tied to sexual orientation with the same urgency as any other sexual harassment allegation, regardless of how the conduct is labeled.

The California Court of Appeal held that harassment based on an employee’s sexual orientation qualifies as sexual harassment under the California Fair Employment and Housing Act (FEHA), allowing the employee’s lawsuit to proceed in court despite a mandatory arbitration agreement.

The case centered on the interaction between FEHA and the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act. Under the EFAA, employees alleging conduct that constitutes sexual harassment under federal, state, or tribal law may elect to pursue their claims in court rather than arbitration.

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The plaintiff, a patient service representative, alleged that a coworker repeatedly criticized his sexual orientation, telling him he “shouldn’t be gay” because it was “sinning.” According to the complaint, the coworker also threatened him, repeatedly pulled his hair, and engaged in unwanted physical contact over several months. The plaintiff reported the conduct to his supervisor, another manager, and HR, but alleged no effective corrective action was taken.

The complaint further alleged that after another physical confrontation with the coworker, HR instead attempted to discipline the plaintiff based on the coworker’s complaint. During that meeting, the plaintiff reported that the ongoing harassment had become so severe he had contemplated suicide. He was later terminated and filed multiple FEHA and related employment claims, including sexual harassment, discrimination, retaliation, failure to accommodate, and wrongful termination.

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The employer moved to compel arbitration based on an agreement the plaintiff had signed when he began employment. The trial court denied the motion, concluding the plaintiff had alleged a sexual harassment claim covered by the EFAA, which exempts qualifying cases from mandatory arbitration under the Federal Arbitration Act (FAA). The employer appealed.

On appeal, the employer argued that harassment based on sexual orientation is legally distinct from sexual harassment under FEHA. It also contended that the alleged conduct was not sufficiently severe or pervasive to support a hostile work environment claim and therefore should not trigger the EFAA’s arbitration exemption.

The Court of Appeal rejected both arguments. Looking to FEHA’s text and the U.S. Supreme Court's reasoning in Bostock v. Clayton County, the court concluded that discrimination or harassment based on sexual orientation necessarily involves sex-based treatment. It also relied on its recent decision in Quilala v. Securitas Security Services USA, Inc., which recognized that harassment based on perceived sexual orientation may constitute sexual harassment under FEHA.

The court also found the complaint sufficiently alleged severe or pervasive harassment. Accepting the allegations as true at the pleading stage, the court concluded a reasonable factfinder could infer that the coworker’s repeated anti-gay comments, threats, physical aggression, and unwanted touching were motivated by hostility toward the plaintiff’s sexual orientation. The allegations, coupled with the plaintiff’s reports to management and HR and the claimed impact on his emotional well-being, plausibly supported a FEHA sexual harassment claim.

Because the complaint adequately alleged sexual harassment under FEHA, the EFAA applied. Consistent with the court’s earlier decision in Liu v. Miniso Depot CA, Inc., the arbitration exemption extended to the plaintiff’s entire lawsuit rather than only the sexual harassment claim. The Court of Appeal therefore affirmed the order denying the employer’s motion to compel arbitration.

Decloedt v. RadNet Management, Inc., Cal. Ct. App., No. B343963 (June 26, 2026).