Federal Court Holds that a Recent Statute Limiting Arbitration Use Does Not Apply Retroactively

In an order issued last week, the U.S. District Court for the Western District of Pennsylvania discussed the retroactive applicability of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, or EFASASHA, which was signed into law in March 2022. (Background on the law on CPR Speaks, here.)

Specifically, the court said that the EFASASHA could not be used to block arbitration when the alleged sexual misconduct, or an ensuing adverse employment action, occurred before the statute was enacted. Barnes v. Festival Fun Parks LLC, No. 3:22-cv-00165 (W.D. Pa. June 27) (available here).

According to the opinion by U.S. District Court Judge Stephanie L. Haines, plaintiff Madalyne Barnes, a lifeguard hired by Festival Fun Parks LLC d/b/a Palace Entertainment for the company’s Idlewild Park and SoakZone in Ligonier, Pa., initiated a suit for a hostile work environment against the park for subjecting her to homophobic slurs after she started dating another female employee. In response, the defendant filed a motion to compel arbitration based on a predispute arbitration agreement, which the plaintiff sought to invalidate relying on the EFASASHA.

The problem for Barnes was that the derogatory slurs and the subsequent termination of employment took place before the EFASASHA was signed into law, although the complaint was filed after the enactment. Thus the court was faced with the issue of whether the Act could be applied retroactively when the relevant provision is prospective.  The EFASASHA states, “This Act (...) shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act.” [Emphasis added.]

Judge Haines looked to the statutory language and legislative history to conclude that “Congress did not intend to apply the act retroactively and, instead, chose to temper the sea change in enforcing arbitration agreements through prospective applicability.”

Specifically, the Judge interpreted “dispute” as the “discriminatory conduct underlying the Complaint” and “claim” as the “complete and present cause of action.” The date of accrual for an EFASASHA claim depends on whether the alleged violations were isolated or continuous. If isolated, the claim accrues “when the plaintiff knows of her injuries.” If continuous, it is the date of the “adverse employment action, such as the termination of employment, or the plaintiff’s injury.”

Here, the dispute arose in July 2019 when the discriminatory conduct began, and Barnes’ claim accrued on July 14, 2021, at the latest when she was fired. Because the EFASASHA became effective March 3, 2022, the EFASASHA cannot be applied to bar arbitration, according to the Haines opinion. 

Other bases Barnes relied on to block arbitration were a lack of mutual assent and the arbitration agreement’s procedural and substantive unconscionability. The court rejected both arguments. First, an absence of signature itself does not imply a lack of assent. The plaintiff’s affixation of a date on the agreement, along with the conveyance of a completed “Onboarding Task Acknowledgment form,” was sufficient for a “reasonable person” to understand as a manifestation of assent. 

The court also refused to find the agreement unconscionable because “no facts were raised demonstrating that an above average inequality existed between the employer and employee’s bargaining power or that there was economic compulsion motivating the adhering party.” [Emphasis added.]

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The author, a student at Harvard Law School in Cambridge, Mass., is a 2023 CPR Summer intern.

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