Major Changes in Affirmative Action Requirements for Federal Contractors
On January 21, President Trump signed an executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” (the Order), revoking Executive Order 11246, the long-standing order that required federal contractors to engage in affirmative action, including by annually developing Affirmative Action Plans (AAP’s) concerning women and minorities. The Order further mandates that the Office of Federal Contract Compliance (OFCCP) immediately cease promoting diversity, investigating federal contractors for affirmative action compliance, and allowing or encouraging federal contractors to engage in workforce balancing.
Below are several key points that manufacturers who are federal contractors need to know:
Federal contractors are no longer required to create an AAP about women and minorities. However, this Order does not impact the affirmative action obligations stemming from the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) for protected veterans or the obligations under Section 503 of the Rehabilitation Act of 1973 for individuals with disabilities. Further, this Order does not absolve contractors of any obligations they may have under state law if they are also state contractors or any other applicable legal obligations.
The Order prohibits federal contractors from considering “race, color, sex, sexual preference, religion, or national origin in their employment, procurement or contracting practices in ways that violate the [n]ation’s civil rights laws.” Additionally, the Order states that federal contract recipients will be required to certify that they do not operate diversity, equity, and inclusion (DEI) programs “that violate any applicable Federal anti-discrimination laws.” Importantly, this does not wholly prohibit employers from having DEI-related policies and practices; rather, it prohibits only those that could be found to violate anti-discrimination laws, such as race-based quotas.
The Order provides contractors with a 90-day grace period during which they may continue to comply with the original regulations. Contractors should use that time to audit their policies and practices under attorney-client privilege to evaluate compliance with this order.
In addition, manufacturers that are not federal contractors may also be impacted by this Order. The Order scrutinizes DEI efforts in the private sector and requires federal agencies to, among other things, report a list of large corporations and organizations that should be subject to civil compliance investigations based on unlawful DEI programs. Accordingly, manufacturers may also want to consult with legal counsel about their DEI initiatives to ensure they are lawful.
Don’t Forget to Submit California Pay Data!
California’s pay data reporting requirements were established under Senate Bill (SB) 973, signed into law in 2020. The law mandates that private employers with 100 or more employees, including those hired through labor contractors, must annually report pay and demographic data to the California Civil Rights Department (CRD).
In 2022, Senate Bill (SB) 1162 expanded these requirements to include workers hired through labor contractors.
Under California’s law, employers must submit their pay data reports annually, with the deadline for the 2025 reporting year set for May 14, 2025. The report must include:
Employee demographic information: race, ethnicity, and sex.
Pay data: categorized by job category and pay band.
Hours worked: for each employee within the reporting year.
Compliance with these reporting requirements is not only a legal obligation but also a step toward promoting fair pay practices. By analyzing and reporting pay data, employers can identify and address potential pay disparities, ensuring equal pay for equal work.
The Civil Rights Department (CRD)’s pay data reporting portal is now open for submitting 2024 reporting. The CRD has published a handbook for employers that provides instructions for submitting and certifying annual reports, in addition to the Frequently Asked Questions page.
The CRD also cautions that Excel templates and CSV examples have been updated so employers should not use prior years’ versions as they will be rejected.
California Civil Rights Department Releases 2025 Pay Data Reporting Guidance—Adding New Race/Ethnicity Category
The California Civil Rights Department (CRD) recently released updated guidance for the 2024 pay data reporting cycle. The updated guidance makes significant changes to the race/ethnicity categories while leaving most other aspects of the prior year reporting process in place.
Quick Hits
California’s updated guidance adds a new racial/ethnicity category for the 2024 reports—”Middle Eastern or North African” (MENA).
The deadline for filing the 2024 California pay reports is May 14, 2025, and the platform opened for new filings on February 3, 2025.
California requires covered employers to file payroll employee reports for their own employees and requires covered employers to file labor contractor employee reports for their labor contractor employees.
California law mandates that private employers with one hundred or more employees, including those hired through labor contractors, must annually submit a pay data report to CRD, detailing employee pay, demographics, and other workforce data, including mean and median hourly wages broken down by race, ethnicity, and gender for each job category. Failure to comply can result in penalties of up to $100 per employee for the first offense and $200 per employee for subsequent violations.
Changes to Race/Ethnicity Categories
For the 2024 reporting cycle, CRD has added “Middle Eastern or North African” (MENA) as a new race/ethnicity category. This change is based on action taken by the U.S. Office of Management and Budget (OMB) to revise the Statistical Policy Directive No. 15 on race and ethnicity data standards. The newly published California Pay Data Reporting Handbook defines this category as “Individuals with origins in any of the original peoples of the Middle East or North Africa, including, for example, Lebanese, Iranian, Egyptian, Syrian, Iraqi, and Israeli.” Another change for the 2024 reporting cycle is that the former “Two or More Races” category has been changed to “Multiracial and/or Multiethnic.” A minor change has been made to remove the word “Other” from the “Native Hawaiian or Other Pacific Islander” category so that it is now “Native Hawaiian or Pacific Islander.” The 2024 reporting materials provide an updated race/ethnicity/sex codes incorporating these changes.
CRD directs employers to report employees in the new MENA category if this information is available. If that information is not available, employers may continue reporting these employees following prior guidance based on the U.S. Equal Employment Opportunity Commission’s (EEOC) instructions for reporting race/ethnicity on the EEO-1 survey. For instance, if an employer has self-ID information for employees where MENA was an available category, the employer may use that information to show which employees have identified under this category. On the other hand, if that information is not available, the employer is free to use the 2023 EEO-1 guidance with respect to these employees. Under the 2023 EEO-1 guidance, individuals with Middle Eastern and/or North African origins are under the “White” race/ethnicity category. This guidance means that employers that collected self-ID information under the prior EEO-1 guidance may continue to report using that self-ID information and do not have to gather new self-ID information to complete the 2024 reports.
Many Things Remain the Same
Outside of the changes to race/ethnicity categories, many of the reporting standards from 2023 remain in place for 2024, including the following:
CRD did not update its guidance as to which workers are labor contractor employees who must be included in the 2024 reports. There was some hope that CRD would provide additional information to help employers understand this requirement. However, the provided information seems to be nearly identical to the guidance in last year’s frequently asked questions (FAQs).
The twelve pay bands used in 2023 remain the same for 2024. Each reported employee’s 2024 W-2 wages are used to place that employee in one of these twelve pay bands for reporting purposes.
Client employers are encouraged to report to CRD labor contractors who do not supply all necessary reporting data but are not required to do so. Just as with the 2023 reporting cycle, the FAQs state that client employers “should” email CRD to report such labor contractors who do not provide all required reporting information. CRD tells client employers to provide names, addresses, and FEINs/SEINs of the labor contractors as well as documentation of the effort to obtain the required information in these emails.
The 2024 reports continue the requirement to provide the same information on remote workers required for the 2023 reports, including identifying which employees work remotely and which remote employees live in and outside California.
The 2024 guidance reinforces the point that labor contractors must provide data showing the client employer establishment where their labor contractor employees are assigned to perform work and that labor contractors should not provide data showing their own establishments. This has been a point of confusion since the labor contractor employee reporting began.
New Reference Resources
CRD has issued additional resources to help filers for the 2024 reporting cycle. For the first time, CRD has issued a 2024 California Pay Data Reporting Handbook. For prior reporting years, CRD had issued FAQs and other guidance, but before this year, it had not provided a handbook. The handbook is twenty-three pages long and organized into sections, starting with a discussion of which employers must file reports, moving to how the filing will be made, and covering other reporting requirements. Unlike the FAQs, which can sometimes be more challenging to follow, the handbook’s organization provides a more user-friendly guide to the pay data filing process. However, the FAQs may still need to be consulted, as they include additional details that could be important to filers.
Another change for the 2024 reporting cycle is that the instructions for completing the reporting templates for the payroll employee and labor contractor employee reports are no longer included as a tab in each template. Instead, the instructions are now found in separate ten-page-long documents. These instructions provide more details than the instruction tabs from prior year reporting cycles. Both sets of instructions include an overview section, step-by-step instructions, and a section discussing single-establishment and multiple-establishment reporting before providing a discussion of each column in the template. This discussion provides important information on the data being requested, the type of data accepted, and character limits. These updated instruction sets, as well as the handbook, are nice additions to CRD’s user resources.
To the extent that they have not yet done so, now may be a good time for employers to assess their preparations to file the 2024 California payroll employee and labor contractor employee pay data reports.
New Executive Orders May Contradict Federal Collective Bargaining Agreements
During his first two weeks in office, President Donald Trump issued several executive orders that may conflict with provisions embedded in federal union contracts and that have led to lawsuits challenging the actions.
Quick Hits
A number of new executive orders may contradict the terms of federal policies and union contracts, especially on issues like telework and diversity, equity, and inclusion (DEI).
Unions have responded by suing to block the executive actions that would end job protections for certain federal employees.
On January 20, 2025, President Trump issued an executive order to reclassify thousands of federal employees as at-will workers, in a category called “Schedule Policy/Career.” At-will employment would make it easier to discharge federal government employees, who will no longer be in the “competitive service” category and benefit from associated job protections.
Also on January 20, President Trump also released an executive order that directs all federal agencies to end remote work arrangements and require employees to return to the workplace full-time “as soon as practicable.” In some cases, this contravenes telework benefits provided in collective bargaining agreements. Prior to the executive order, more than half of federal employees were eligible to telework, according to a report from the U.S. Office of Personnel Management (OPM).
Another January 20 executive order halts all diversity, equity, and inclusion (DEI) programs, policies, and offices in the federal government. It directs OPM to review and revise all federal employment practices, union contracts, and training programs to comply with this new policy. It also instructs the U.S. attorney general to scrutinize private-sector DEI programs.
Furthermore, another January 20 executive order states that the federal government will recognize only two genders: male and female. It rejects the transgender and nonbinary categories. It rescinds previous guidance from the U.S. Equal Employment Opportunity Commission (EEOC) under the Biden administration, which held that LGBTQ employees are legally protected from harassment and discrimination under Title VII of the Civil Rights Act of 1964.
The EEOC’s new acting chair, Andrea Lucas, recently announced a policy shift on enforcement of antidiscrimination laws. She opposes the position that unlawful harassment under Title VII includes the “denial of access to a bathroom or other sex-segregated facility consistent with [an] individual’s gender identity” and the “repeated and intentional use of a name or pronoun inconsistent with [an] individual’s known gender identity.”
Some union contracts have clauses protecting LGBTQ workers from harassment, discrimination, and retaliation. Likewise, some union contracts guarantee workers access to restrooms that align with their gender identity, and require management to use an employee’s preferred name and pronouns.
Finally, on January 31, 2025, President Trump released an executive order nullifying collective bargaining agreements that were finalized with federal agencies during the last month of the Biden administration. The status of those recently ratified union contracts remains uncertain.
Next Steps
Depending on their written terms, some provisions in union contracts governing the employment of federal workers may no longer be enforceable based on the Trump administration’s executive orders related to telework, DEI, and protections for LGBTQ workers. The new executive orders that conflict with written union contract language call into question whether the directives are enforceable without collective bargaining.
Even though unions have filed lawsuits to challenge the new executive orders, the outcomes of those lawsuits remain uncertain.
China-Based Cotton Companies Added to UFLPA Entity List: What It Means for Apparel
The U.S. Department of Homeland Security (DHS) announced the addition of 37 companies based in the People’s Republic of China (PRC) to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List because of alleged use of forced labor. Of these, 26 operate in the cotton sector.
According to DHS, Huafu Fashion Co., Ltd. and 25 of its subsidiaries were identified as entities involved in cotton production linked to the Xinjiang Uyghur Autonomous Region (XUAR). Huafu operates a vertically integrated supply chain, ranging from cotton cultivation to textile manufacturing. Twenty-two of its subsidiaries are located in the XUAR, with the remaining three in Zhejiang Province.
With a vertically integrated supply chain spanning cotton cultivation, processing, and textile production, these entities present significant compliance risks for apparel companies sourcing from the PRC.
Businesses linked to these entities may face shipment detentions under UFLPA enforcement.
Breaking Down UFLPA Enforcement: Apparel and Textiles in Focus
In December 2024, U.S. Customs and Border Protection (CBP) processed more than 2.8 million entry summaries with a combined value exceeding $290 billion.
During the same period, CBP targeted 1,404 entries, valued at over $18.7 million, for suspected links to forced labor in supply chains. These efforts encompass goods subject to both UFLPA and Withhold Release Orders (WROs).
The apparel, footwear, and textiles sector UFLPA enforcement statistics:
Total shipments: 1,996 (up from 1,963 in December 2024)
Shipments denied: 1,274 (63.8%)
Shipments released: 649 (32.5%)
Shipments pending: 73
Total shipment value: $90.42 million
With nearly 2,000 shipments detained, the apparel and textile sector remains a critical target of CBP’s enforcement efforts. For the apparel and textile industry—known for its complex, global supply chains—this means increased compliance requirements and potential shipment detentions. Importers face significant risks, including delays, penalties, and reputational damage if they cannot demonstrate that their products are free of forced labor. As UFLPA enforcement intensifies, apparel and textile importers are encouraged to partner with compliance experts to navigate these complex regulations effectively.
This largest-ever batch of additions reinforces that we are implementing the full force of this law, making impactful updates to the UFLPA Entity List, and enhancing U.S. Customs and Border Protection’s enforcement capabilities.
www.dhs.gov/…
NCAA Bars Transgender Athletes from Women’s Sports Aligning With President Trump’s Executive Order
On February 6, 2025, the National Collegiate Athletic Association (NCAA) announced its new policy, prohibiting athletes assigned male at birth from participating in women’s sports competitions, aligning the NCAA eligibility rules with President Donald Trump’s recent executive order (EO) barring transgender athletes from women’s sports. The new rules reverse a prior policy of allowing athletes to participate in accordance with their gender identity.
Quick Hits
The NCAA Board of Governors voted to adopt an updated transgender athlete participation policy that prohibits athletes assigned male at birth from competing in NCAA women’s competitions.
The new policy aligns with President Donald Trump’s executive order barring transgender athletes from competing in women’s sports.
The executive order takes the position that allowing transgender participation in women’s sports undermines the fairness and opportunities for women and girls and threatens federal funding for educational programs that do not comply.
The NCAA aims to establish clear national eligibility standards in response to the differing state laws and court decisions surrounding this issue.
Under the updated participation policy for transgender athletes, “[r]egardless of sex assigned at birth or gender identity, a student-athlete may participate (practice and competition) in NCAA men’s sports, assuming they meet all other NCAA eligibility requirements.”
For women’s sports, “[a] student-athlete assigned male at birth may not compete for an NCAA women’s team.” However, such student-athletes “may continue practicing with a women’s team and receive all other benefits applicable to student-athletes.” “A student-athlete assigned female at birth who has begun hormone therapy (e.g., testosterone) may not compete on a women’s team.” However, they, too, may continue practicing with a women’s team and receive all other applicable benefits.
“We strongly believe that clear, consistent, and uniform eligibility standards would best serve today’s student-athletes instead of a patchwork of conflicting state laws and court decisions. To that end, President Trump’s order provides a clear, national standard,” NCAA President Charlie Baker said in a statement.
The change comes a day after President Trump signed an EO titled “Keeping Men Out of Women’s Sports.” The EO states that allowing transgender athletes to compete in women’s sports “is demeaning, unfair, and dangerous to women and girls, and denies women and girls the equal opportunity to participate and excel in competitive sports.”
While not directly addressing the NCAA, the EO declared that it is “the policy of the United States to rescind all funds from educational programs that deprive women and girls of fair athletic opportunities, which results in the endangerment, humiliation, and silencing of women and girls and deprives them of privacy.”
The EO had significant implications for the NCAA schools, which rely on federal funding. After the EO, NCAA President Baker said that the Board of Governors would “take necessary steps to align NCAA policy” with the EO.
Under the NCAA’s prior policy, adopted by the Board of Governors in January 2022, transgender women athletes were allowed to compete in NCAA women’s sports after submitting documentation of “gender affirming treatment” by a medical professional and evidence that their testosterone levels are “within the allowable levels for the sport” in which they plan to compete.
In addition, NCAA schools are faced with shifting interpretations of Title IX of the Education Amendments of 1972, which requires that schools provide equal opportunity to students, regardless of sex, including in terms of sports participation and “athletic financial assistance.”
On January 9, 2025, a federal court in Kentucky vacated a Biden-era U.S. Department of Education rule on Title IX adopted in 2024, which expanded the definition of sex-based harassment to include sexual orientation and gender identity. The Department of Education has since confirmed that it will enforce Title IX under a 2020 rule issued during President Trump’s first term.
The recent actions align with President Trump’s inauguration day EO 14168, titled “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” which directed federal agencies to “enforce laws governing sex-based rights, protections, opportunities, and accommodations to protect men and women as biologically distinct sexes.”
Next Steps
The new NCAA participation policy will have significant implications for transgender athletes currently competing or seeking to compete in NCAA sports, likely meaning that they will no longer be able to compete in NCAA women’s competitions. Baker’s statements further indicate the NCAA’s desire for national standards in an era that has seen major changes to college sports and eligibility rules pushed by antitrust litigation and an inconsistent patchwork of state laws and regulations, including changes to athlete transfers, the allowance of compensation for name, image, and likeness, and the potential adoption of revenue sharing.
DOJ Begins Its Own DEI Enforcement Efforts
Wednesday evening, February 5, 2025, Attorney General Pam Bondi issued a series of memos to various divisions of the Department of Justice (DOJ). One memo asserted that the DOJ will take action to enforce President Trump’s efforts to eliminate illegal diversity, equity, and inclusion (DEI) initiatives, as outlined in Executive Order 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”).
This memo, titled “Ending Illegal DEI And DEIA Discrimination And Preferences,” tasks the DOJ’s Civil Rights Division with investigating, eliminating, and penalizing illegal DEI “preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” By March 1, 2025, the Civil Rights Division and the Office of Legal Policy are to submit a report containing recommendations to “encourage the private sector to end illegal discrimination and preferences” related to DEI. That report is also supposed to identify the most “egregious and discriminatory DEI and DEIA practitioners in each sector of concern.” One big takeaway from this memo is the implication that some private companies may face criminal penalties for DEI initiatives.
Bondi also directs the DOJ to work with the Department of Education to eliminate DEI programs at universities, based on the Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. v. Fellows of Harvard Coll., 600 U.S. 181 (2023).
Notably, the memo itself does not purport to prohibit educational, cultural, or historical observances that “celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.” Examples of these types of observances include Black History Month and International Holocaust Remembrance Day.
This new effort from the DOJ will likely face legal scrutiny in the coming weeks, as federal courts have routinely upheld private employers’ First Amendment right to promote DEI. Employers should stay up to date with the rapidly evolving DEI landscape and consult with legal counsel as they evaluate their practices and initiatives for compliance with federal non-discrimination laws.
2025 Employment Law Updates
Many state and local government employment laws went into effect January 1, 2025. Here is a non-exhaustive list of 2025 employment law updates.
The Worker’s Compensation Time of Hire Notice can be found here.
The Worker’s Compensation Updated Poster can be found here.
Employers should also be aware that numerous hourly minimum wage rate increases are set to take effect in various jurisdictions on January 1, 2025, as previously detailed here.
Again, this is a non-exhaustive list of employment law updates. Contact your Polsinelli attorney if you have any questions or need assistance regarding employment law compliance in 2025, as well as to get up to speed on the latest employment law updates.
Is Lack of Diversity the Cause of DExit?
Suddenly, DExit has moved from the theoretical to the real. Over the last several months, several publicly traded companies have filed proxy materials with the Securities and Exchange Commission that include proposals to reincorporate in Nevada. See Several More Companies Propose Move From Delaware To Nevada. More recently, Dropbox filed materials disclosing a plan to reincorporate in Delaware and it has been reported that Bill Ackman intended to reincorporate his management company in Nevada. Suddenly, the Silver State is looking positively golden.
Delaware legislators have taken notice. In an opinion piece Senato Nicole Poore and Speaker Melissa Minor-Brown duly note the importance of the corporate franchise business to Delaware. According to these legislators, the problem is a lack of diversity:
While Delaware’s Court of Chancery has remained widely respected for its expertise and fairness, we acknowledge that it’s important to address its lack of diversity and ensure the judiciary reflects the broader perspectives of the communities it serves, thereby enhancing its credibility and fairness, and Delaware’s leadership in corporate governance and justice.
I have yet to find a proxy statement which cites a lack of diversity in the Delaware courts as a reason for leaving.
Calling the Right DEI Play for the NFL
Today’s Wall Street Journal story about Roger Goodell’s decision to maintain the NFL’s DEI programs reported that Mr. Goodell stood by the football league’s diversity initiatives, which would not change in response to the political climate. The article noted that Mr. Goodell characterized the NFL’s programs as being both positive for the league and a “reflection of our fan base and our communities and our players.” While the NFL’s decision to push back against the current anti-DEI trend is notable, it is clear that the NFL made this decision after conducting a thoughtful and introspective process, which included an understanding of a key DEI goal – which is to level both the literal and figurative playing field.
Mr. Goodell noted that the purpose of the NFL’s DEI programs in reference to the talent pipeline was “about opening that funnel and bringing the best talent into the NFL.” DEI detractors often base their attacks on the premise that DEI causes bias, rather than diminishing it. But in fact, and as I noted last year in Merit Unmasked, DEI’s true goal is to unmask overlooked talent. I posited then (and believe now) that DEI should be framed as talent-searching, and never as talent-diminishing. If we reframe the approach to DEI in this fashion – like the NFL and many other businesses that have engaged in meaningful introspection about their DEI programs – then it becomes much easier to understand, accept, and advocate for the reasons supporting DEI, and how to tailor it for each business.
The NFL has long offered Americans the joy (and misery) of competition, the celebration of (and frustration with) sport, and the community of (and discord among) fans. But it is interesting times indeed to see the NFL as a model for American business on how to best fully serve corporate communities, employees, and stakeholders.
Free Speech is Not a License to Destroy
Many fervent activists are losing touch with the fact that free speech is not a license for violence, harassment, and vandalism. From college campuses and city streets to federal buildings, militant protesters are using force to draw attention to their causes. It’s time for the legal system to stop this reckless behavior.
The unlawful blockade at the Energy Department’s headquarters in Washington, D.C., this past month is a high-profile example of the slide from protected speech to misconduct. Climate Defiance, the climate activist group behind the blockade, has made national headlines over the past year through their deployment of confrontational tactics, such as storming a baseball field attended by members of Congress and rushing a stage during a book launch event featuring Minnesota Senator Amy Klobuchar.
It’s not just at our civic institutions where an “ends justify the means” attitude toward harassment and property destruction is taking hold. In the rioting after a 2020 police shooting in Kenosha, Wisconsin, the New York Times reported that 115 small businesses, many of them minority-owned, were either destroyed or damaged.
Of course, the rogue actions of a few people should not lead to the condemnation of any cause. But for some protesters, unlawful aggression is increasingly the point.
At a gathering of protesters in Portland, Oregon, literature titled Why Break Windows was disseminated, arguing that property destruction was excusable as part of a righteous cause. One recent poll found that 41% of college students believe that violence is justified if it’s used to prevent “hate speech.” This sentiment closely parallels themes conveyed in the 2021 publication How to Blow Up A Pipeline, which promotes sabotage of industrial facilities as a substitute for non-violent protests. After finding its way into college curriculums, the book was adapted into a movie that was described in the FBI Weapons of Mass Destruction Directorate as a vehicle that “could spark eco-terrorism against U.S. energy infrastructure.”
The growing juxtaposition of speech and violence by protest movements is concerning. It’s also a matter where courts may soon weigh in.
Next month, a North Dakota jury will consider whether to hold Greenpeace liable over its role in the destructive protests over the Dakota Access Pipeline. The lawsuit claims that the opposition to the pipeline devolved into property destruction, trespass, assaults on company employees, and other actions that far exceed the bounds of democratic political action. The damage from the protests cost the companies involved in the pipeline an estimated $7.5 billion.
Greenpeace argues that the lawsuit is an “attack on free speech.” But it’s not Greenpeace’s speech or public positioning that the lawsuit questions—it’s the organization’s conduct.
If the case is successful, it could mean bankruptcy for Greenpeace. A win for the plaintiffs would also send a strong signal that while the right to protest is protected by our Constitution, violence and property destruction are not.
Another Arbitration Agreement Bites the Dust!
The California Court of Appeal dealt another blow to arbitration, just months after we reported the last such decision here.
This time, the Court ruled that the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (“EFAA”) overrides state law—even in cases in which the employee has signed an arbitration agreement that explicitly invokes state law favoring arbitration.
Kristin Casey, a former employee of D.R. Horton, Inc., sued the company and one of its employees, Kris Hansen, for sexual harassment, sex discrimination, retaliation, and failure to prevent discrimination and harassment in September 2023. D.R. Horton attempted to enforce an arbitration agreement in Casey’s employment contract, which included a choice-of-law provision applying California law. Casey opposed arbitration, arguing that the EFAA gave her the right to pursue her claims in court.
The EFAA, enacted in 2022, provides that a “person alleging conduct constituting a sexual harassment dispute” may elect that “no predispute arbitration agreement . . . shall be valid or enforceable with respect to the case filed under federal, tribal or state law and relates to the sexual harassment dispute.”
The trial court upheld the arbitration agreement, enforcing the terms to which Casey had agreed. But on a writ petition, the California Court of Appeal reversed, holding that the EFAA preempts state law so long as the employment relationship involves interstate commerce (a low hurdle). The court further determined that an employer cannot rely on a choice-of-law clause to avoid the effect of the EFAA.
You can read the full decision here.