Kristin Casey began working in 2015 as a real estate agent for D.R. Horton, a national homebuilding company. She agreed to binding arbitration of disputes with her employer. A separate clause in her agreement, titled “Governing Law,” provides in full: “The construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of California.”

She was a successful agent for D.R. Horton and became one of the company’s top performers. In late 2022 she was assigned to work with Kris Hansen at a remote development site in Fairfield.

Starting on their second day working together, Hansen made a series of unwanted sexual remarks, and Casey felt unsafe and became physically nauseous when she was around Hansen. Casey ultimately went on medical leave because of the strain, and she resigned in September 2023.

Casey filed a lawsuit against D.R. Horton and Hansen. She alleged several causes of action under the Fair Employment and Housing Act based upon sexual harassment.

D.R. Horton filed a motion to compel arbitration, which was joined by Hansen. Casey opposed the motion, relying on the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (9 U.S.C. §§ 401–402, EFAA or Act). The trial court granted the motion to compel, reasoning that the EFAA was inapplicable because the parties’ employment agreement specified that California law governed. Casey then filed this petition for a writ of mandate.

The Court of Appeal granted Casey’s petition and directed the trial court to vacate its order granting the motion to compel arbitration in the published case of Casey v. Superior Court -A170650 (February 2025). In doing so, it held that the EFAA preempts attempts under state law to compel arbitration of cases relating to a sexual harassment dispute, and parties cannot contract around the law by way of a choice-of-law provision.

D.R. Horton’s argument is essentially that parties who select state law in their arbitration agreements effectively opt out of the FAA and the EFAA even if their contracts involve interstate commerce.

The Federal Arbitration Act (FAA) and California’s corollary, the California Arbitration Act (Code Civ. Proc., § 12803 et seq., CAA), generally embody a liberal policy in favor of the enforcement of arbitration agreements. The statutes can work in tandem. Thus, where the FAA applies to an arbitration agreement in California, the CAA may provide the procedures to enforce such an agreement if the parties selected California law and the state procedures do not offend policies embodied in the FAA.

But the federal and state schemes differ in one key aspect that controls the resolution of this case: whereas both the FAA and CAA provide exceptions to the enforcement of arbitration agreements when grounds exist for the revocation of any contract (section 2; § 1281), the FAA, unlike the CAA, also excepts agreements “as otherwise provided in [the EFAA]”—i.e., all cases relating to a sexual harassment dispute. (Section 2.)

The EFAA, a relatively new statute 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 which is filed under Federal, Tribal, or State law and relates to the . . . sexual harassment dispute.” (9 U.S.C. § 402(a).).

In general, there are three situations in which state law is preempted, one of which is conflict preemption, where it is impossible to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purpose. The Court of Appeal concluded that “The EFAA’s purpose is plainly obstructed by an attempt to use state law to force a person who is alleging sexual harassment to arbitrate their dispute.”

Employer Cannot Use Choice-of-Law Provisions to Avoid EFAA