Reported / Citable
Background
Jessica Combs accepted a job at Netflix in May 2017 under an employment agreement that required arbitration of all employment disputes. Over the next four years, she alleged she was repeatedly subjected to a sexualized workplace culture, including unwanted advances and a hostile environment that Netflix management consistently ignored despite her multiple internal complaints. In December 2021, Netflix fired her; Combs alleged the real reason was retaliation for those complaints, though Netflix said she had failed to comply with its COVID-19 vaccination policy.
In August 2023, Combs filed an administrative complaint with California’s Department of Fair Employment and Housing and received an immediate right-to-sue letter. She then sued Netflix in California state court in July 2024, raising state-law harassment, discrimination, and hostile work environment claims. Netflix removed the case to the U.S. District Court for the Central District of California and moved to compel arbitration.
Combs argued that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) — a federal law enacted March 3, 2022 — protected her right to proceed in court rather than arbitration. The EFAA allows employees asserting sexual harassment claims to opt out of predispute arbitration agreements, but contains a timing provision: it applies only to disputes or claims that “arise or accrue” on or after its March 3, 2022 effective date. The district court held the EFAA did not cover Combs’s case and compelled arbitration. The Ninth Circuit agreed.
The Court’s Holding
This was the first time the Ninth Circuit interpreted the EFAA’s timing provision, and the panel adopted a two-part framework. First, on “claim accrual”: using the familiar legal standard, a claim accrues when the plaintiff has a complete and present cause of action — i.e., when she has the right to file suit and obtain relief. Under that standard, Combs’s claims accrued before March 3, 2022, because her harassment and termination all happened between 2017 and 2021.
Second, on when a “dispute arises”: the panel rejected both extremes. Combs argued that no dispute arose until she filed her formal external complaint with the state agency in August 2023 — too narrow, the court said, because it would make “dispute” synonymous with “filing a formal proceeding.” Netflix implicitly suggested that a dispute arises whenever the underlying conduct occurs — too broad, the court said, because it would render “dispute” synonymous with “claim accrual” and make Congress’s use of both terms superfluous. Instead, the panel adopted the standard articulated by the Third Circuit in Cornelius v. CVS Pharmacy: a dispute arises “when an employee registers disagreement — through either an internal complaint, external complaint, or otherwise — with his or her employer, and the employer expressly or constructively opposes that position.” Applying that test, Combs’s dispute with Netflix had plainly arisen before March 3, 2022: she made repeated internal complaints between 2017 and 2021, Netflix consistently ignored or rejected them, and by December 2021 Netflix had fired her — the ultimate expression of opposition. Because both the dispute and the claims predate the EFAA’s effective date, the statute does not apply, and Netflix’s arbitration clause is enforceable.
The Ninth Circuit’s ruling aligns with the Third, Sixth, and Eighth Circuits, as well as the California Court of Appeal’s 2024 decision in Kader v. Southern California Medical Center, creating a consistent national standard on this question.
Key Takeaways
- Under the EFAA’s timing provision, two separate tests apply: (1) a “claim accrues” under ordinary accrual principles — when the plaintiff has a complete and present cause of action; and (2) a “dispute arises” when the employee registers disagreement with the employer (through an internal complaint, external complaint, or otherwise) and the employer expressly or constructively opposes it.
- The EFAA does NOT protect employees whose harassment occurred entirely before March 3, 2022, even if they did not file a formal complaint until after that date — the statutory clock runs from when the dispute arose or the claim accrued, not when litigation began.
- An employer’s inaction in response to complaints (failing to investigate or remediate) qualifies as “constructive opposition” that can trigger the dispute-arose test — meaning disputes can arise even when an employer says nothing at all in response to harassment complaints.
- Employees who experienced pre-2022 harassment and want to avoid arbitration should carefully evaluate when their dispute actually arose and when their claims accrued — if any element of the conduct (particularly for continuing hostile-environment claims) extends post-March 3, 2022, the EFAA calculus may be different.
- California employers with arbitration agreements should be aware that this Ninth Circuit standard is now the law for federal cases in California’s four district courts, but continue to monitor whether state-court cases take a similar approach under California’s own anti-arbitration protections.
Why It Matters
The EFAA was one of Congress’s most significant pro-employee labor measures of the 2020s, stripping employers of the ability to force sexual harassment and assault claims into private arbitration. But its reach has always depended on the timing provision, and until now the Ninth Circuit had not defined when a “dispute arises” or a “claim accrues” under that provision. This decision answers both questions for California’s federal courts — covering the Central, Eastern, Northern, and Southern Districts of California, which collectively handle an enormous volume of employment litigation.
The practical impact for California practitioners is substantial. Employers defending pre-2022 harassment claims can now argue with greater certainty that the EFAA does not apply to disputes that crystallized before March 3, 2022, and can enforce arbitration agreements accordingly. Employee-side lawyers must carefully analyze the timeline of internal complaints and employer responses — not just the date a lawsuit or agency complaint was filed — to determine whether the EFAA’s protections are available. In cases involving continuing hostile-environment conduct that straddles March 2022, the accrual and dispute-arising questions will require a closer look.