California Court Holds Sexual Orientation Harassment Claims Are Exempt from Arbitration Under the EFAA

In Decloedt v. Radnet Management, Inc., 2026 WL 1959641 (Cal. Ct. App. June 26, 2026, No. B343963), a patient service representative sued his former employers, supervisor, and coworker, asserting 11 state-law causes of action. The complaint included hostile work environment and sexual harassment claims under California’s Fair Employment and Housing Act (FEHA), both based on allegations that the plaintiff was harassed because of his sexual orientation.

The plaintiff alleged that, beginning in early 2022, a coworker repeatedly made derogatory comments about his homosexuality, telling him that being gay was a sin and “not okay.” He also alleged that the coworker threatened him, pulled his hair, and engaged in unwanted physical contact. After he filed suit in October 2024, the employer defendants moved to compel arbitration pursuant to an agreement governed by the Federal Arbitration Act (FAA). The plaintiff opposed the motion, arguing that his claims fell within the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA). Whether the EFAA applied became the central issue in the case.

The arbitration dispute centered on the EFAA, a federal statute that limits the enforceability of certain pre-dispute arbitration agreements that would otherwise be enforceable under the FAA. Under the EFAA, a pre-dispute arbitration agreement is not enforceable, at the employee’s election, in a case that relates to a “sexual harassment dispute.”

The statute defines a “sexual harassment dispute” as a dispute relating to conduct alleged to constitute sexual harassment under applicable federal, tribal, or state law. As a result, whether the FAA exemption applied turned on whether plaintiff had alleged sexual harassment under California law.

The Los Angeles Superior Court denied the motion to compel arbitration. It concluded that the complaint sufficiently alleged sexual harassment under the FEHA, thereby triggering the EFAA exemption. In reaching this conclusion, the trial court held that a claim for sexual orientation harassment under the FEHA constituted a sexual harassment claim under California law. Because the court determined the plaintiff had alleged a sexual harassment claim, it found the EFAA exemption applied and declined to compel arbitration.

The Court of Appeal, Second District, Division One, affirmed the order denying arbitration. It concluded that harassment based on sexual orientation is a form of sexual harassment under the FEHA and that the plaintiff had sufficiently alleged a sexual harassment claim to invoke the EFAA’s arbitration exemption.

The court began with the FEHA’s text. The FEHA prohibits harassment because of both “sex” and “sexual orientation.” The issue before the court was whether harassment targeting an employee’s sexual orientation also qualifies as harassment because of sex.

To answer that question, the court relied heavily on the United States Supreme Court’s decision in Bostock v. Clayton County (2020) 590 U.S. 644. There, the Supreme Court held that discrimination against an employee because the employee is gay or transgender necessarily constitutes discrimination because of sex under Title VII. The Court of Appeal found that reasoning persuasive because the FEHA contains the same “because of sex” language. Applying Bostock, the appellate court concluded that harassing an employee because of his or her homosexuality is, as a matter of law, harassment because of sex.

In light of this decision, California employers may wish to:

• Review arbitration agreements with counsel and assess how EFAA challenges may affect enforceability when employees assert sexual harassment claims, including claims premised on sexual orientation harassment.
• Recognize that harassment based on sexual orientation might constitute sexual harassment under the FEHA and may trigger the EFAA’s arbitration exemption.
• Understand that California courts may refuse to compel arbitration where an employee plausibly alleges sexual harassment covered by the EFAA, potentially affecting claims beyond the harassment cause of action itself.
• Confirm anti-harassment policies, complaint procedures, and workplace training expressly address harassment based on sexual orientation.
• Document complaints, investigations, and corrective measures, and respond promptly to reports of harassment to reduce potential liability exposure.

Decloedt reflects California courts’ continued examination of the intersection between FEHA harassment claims and arbitration agreements. California employers should consider reviewing their arbitration agreements, anti-harassment policies, and training programs to confirm they remain aligned with current law.