When One Claim Unlocks The Courthouse: The Sixth Circuit Expands The EFAA's Reach And Limits Employer Arbitration Agreements

Arbitration was never perfect. But for employers managing employment disputes, it offered something the courthouse could not: a private forum where allegations were tested before they became permanent public record. A complaint filed in federal court is indexed, searchable, and reportable from the moment it lands on the docket. The claims it contains, however disputed and however untested, carry the weight of a formal legal document without carrying the burden of proof. For allegations involving personal conduct, that asymmetry can be severe. The accused may ultimately prevail, but the filing itself has already done its work.

The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA), enacted in 2022, took direct aim at mandatory arbitration in harassment cases. A February 2026 decision from the US Court of Appeals for the Sixth Circuit has now pushed the statute's reach further than any appellate court before it, with consequences every employer should understand.

The EFAA: What It Does and What It Changed

For nearly a century, the Federal Arbitration Act (FAA) permitted employers to require employees to resolve virtually all workplace disputes through binding, private arbitration. That framework gave employers meaningful control over where disputes were heard, how proceedings were conducted, and how much of the record remained confidential.

The EFAA amended the FAA directly. Enacted with bipartisan support in the wake of the #MeToo movement, the statute renders pre-dispute arbitration agreements unenforceable as to claims of sexual harassment or sexual assault. The election to proceed in court belongs exclusively to the employee. Employers cannot override it, courts cannot compel arbitration over a timely objection, and no contract can waive the right in advance. The statute applies to any dispute that arises after March 2022, meaning agreements signed years earlier offer no protection if the underlying conduct postdates the law.

What the EFAA left open was how far it extended when harassment claims appear alongside other claims in the same lawsuit. The Sixth Circuit resolved that ambiguity in terms that give plaintiffs' counsel a significant structural advantage.

Bruce v. Adams & Reese, LLP: One Claim, Entire Case

The plaintiff in Bruce v. Adams & Reese, LLP sued her former employer for wrongful termination, disability discrimination under the Americans with Disabilities Act (ADA), and sexual harassment under Title VII, despite having signed a broad arbitration agreement. The employer moved to compel arbitration on the non-harassment claims. The district court refused. The Sixth Circuit affirmed, two to one.

The majority's reasoning turned on a single word. The EFAA makes arbitration agreements unenforceable "with respect to a case" involving sexual harassment. Congress could have written "claim." It did not. That choice was deliberate and, the court held, dispositive. Once a qualifying harassment claim is adequately pled, the entire proceeding follows it out of arbitration. The claim need not be primary, dominant, or even strong. It need only be present. The decision is binding in Michigan, Ohio, Kentucky, and Tennessee. District courts across the country have largely read the EFAA the same way, other circuits are addressing the same question, and the current alignment among lower courts reduces pressure on the Supreme Court to step in. Employers should not expect the legal landscape to improve without congressional action.

The dissent, written by Judge Amul Thapar, did not dispute the statutory reading. His objection was narrower and, for practitioners, more useful: he concluded the plaintiff had not adequately pled a harassment claim at all. The majority applied a permissive standard, accepting that allegations the harasser "would" engage in harassing conduct were enough to support a hostile work environment inference. The dissent called that too thin. That disagreement defines the threshold that determines whether the EFAA applies in the first place.

Tack on a Harassment Claim, Unlock the Courthouse

Bruce illustrates a structural problem employers should expect to recur. The sexual harassment allegations in that case—three specific comments over a year, one of them dated—were, as the dissent argued, too isolated and vague to independently sustain a hostile work environment claim. Yet they were enough to invoke the EFAA and pull the entire case out of arbitration. The mechanism is not unique to those facts. Any complaint that pairs a discrimination, retaliation, or other employment claim with a thin hostile work environment count now has a vehicle to avoid arbitration entirely—and the Sixth Circuit's permissive pleading standard appears to have lowered the bar for getting there.

The tax code compounds the problem in ways plaintiff's counsel understands well. Under §162(q) of the Internal Revenue Code, enacted as part of the same #MeToo-era legislative wave, settlement payments in sexual harassment cases are not deductible when subject to a nondisclosure agreement—and neither are the related attorneys' fees. A harassment count that may have been tacked onto the complaint primarily to generate reputational pressure now also makes confidential resolution more expensive for the employer. The thinnest claim in the pleading can become the most expensive one to settle. Employers and their counsel need to understand this dynamic before entering settlement discussions, not during them.

Practical Guidance for Employers in EFAA Litigation

• Challenge the harassment claim at the outset. The dissent in Bruce signals the threshold question in every EFAA case: did the plaintiff actually plead a viable harassment claim? If not, the EFAA does not apply and the remaining claims may be returned to arbitration. A targeted motion to dismiss on thin or conclusory harassment allegations should be the first strategic decision, not an afterthought.
• Move early on the public record. Seek protective orders governing discovery materials before specific documents are at issue. Courts are more receptive at the outset. Where allegations involve sensitive information about non-parties, targeted motions to seal specific exhibits are worth pursuing. A shorter public record has real value—every substantive filing adds to a docket that is searchable and permanent.
• Coordinate legal and communications strategy from day one. The complaint will reach employees and the press before the employer has responded. Outside counsel, in-house counsel, and Human Resources (HR) leadership should align on internal messaging before the answer is filed. Consistent, factual communication from leadership limits reputational damage in ways that no motion can replicate.
• Evaluate statements made outside the complaint. Allegations within a complaint carry absolute litigation privilege. Statements made outside it—press communications, social media posts, statements to third parties—may not. Where a plaintiff or their counsel has made demonstrably false public statements beyond the pleading, evaluate whether independent claims arise. That analysis should happen early, while the record is still forming.
• Address named individuals separately. Accused employees frequently appear by name in EFAA complaints and carry reputational consequences regardless of outcome. Their litigation interests will not always align with the employer's. Assess early whether indemnification obligations extend to reputational harm, whether separate counsel is warranted, and whether the individual's presence in the case complicates preferred resolution.
• Approach settlement with employment and tax counsel together. When a complaint includes a harassment count alongside other claims, the structure of any resolution—sequencing of dismissals, allocation of payments, presence or absence of an NDA—carries material tax consequences under §162(q). Plaintiff's counsel understands this leverage. Potential approaches worth exploring include whether plaintiff will agree to dismiss the harassment count before settlement is finalized, whether claims can be resolved in stages to isolate the harassment component, and how allocations can be documented to reflect the actual claims resolved. The Internal Revenue Service (IRS) has issued limited guidance on multi-claim settlements. An improvised settlement will cost more than a deliberate one.
• Invest in prevention. The EFAA changed the forum. It did not change the fact that a workplace without harassment is still the most effective legal strategy available. Robust policies, credible reporting mechanisms, and well-documented investigations reduce meritorious claims and improve litigation posture when claims arise anyway.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.