In a significant decision, the Sixth Circuit Court of Appeals has recently held that a single sexual harassment allegation—if plausibly pleaded—may prevent enforcement of an otherwise-binding arbitration agreement for all claims in a lawsuit, including unrelated claims like discrimination or retaliation. Specifically, the Sixth Circuit adopted a broad interpretation of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act ("EFAA"), concluding that the statute can render an arbitration agreement unenforceable as to an entire case, not just the sexual harassment claim itself.

In Bruce v. Adams & Reese, the plaintiff brought claims of disability discrimination, retaliation, sexual harassment and hostile work environment against defendant, in violation of Title VII of the Civil Rights Act and the Americans with Disabilities Act. Although the plaintiff had signed a broad arbitration agreement covering all employment-related claims upon hire, the law firm sought to compel arbitration only of the ADA claims, acknowledging that the sexual harassment claim could proceed in court under the EFAA, which prohibits sending sexual harassment cases to arbitration rather litigating them in open court. The defendant also moved to dismiss the sexual harassment claim under Rule 12(b)(6). On February 25, 2025, the United States District Court for the Middle District of Tennessee denied both motions.

Exactly one year later, on February 25, 2026, on appeal, the Sixth Circuit affirmed the district court’s order denying the motion to dismiss and motion to compel. First, the court found that the plaintiff plausibly alleged sexual harassment. Second, focusing on the statutory language of the EFAA, the Sixth Circuit concluded that where a plausibly alleged sexual harassment claim is involved, EFAA renders an arbitration agreement unenforceable with respect to a plaintiff’s entire case, and not only with respect to the sexual harassment claim. As a result, none of the plaintiff’s claims—harassment or otherwise—could be compelled to arbitration.

While some district courts interpreting the EFAA had reached similar conclusions (e.g. Southern District of New York and District of Columbia), the Sixth Circuit is the first federal court of appeals to adopt this broad reading of the EFAA. The Sixth Circuit’s ruling significantly raises the stakes for employers in Tennessee, Kentucky, Ohio and Michigan.

As a practical matter, the decision creates a significant shift in how employment claims may be litigated. Plaintiffs may be able to avoid arbitration entirely by including a sexual harassment allegation in their complaint, even where the remaining claims are unrelated. In turn, employers may lose the ability to compel arbitration of otherwise arbitrable claims, such as discrimination or retaliation. This dynamic also introduces a potential pleading incentive for plaintiffs to assert harassment claims as a means of keeping the entire dispute in court.

In light of the Sixth Circuit’s decision, employers should begin planning for the increased likelihood that employment disputes—particularly those involving multiple claims—will proceed in court rather than arbitration. This shift may affect litigation strategy, costs, and timelines, and should be factored into early case assessment and budgeting decisions.

The decision also reinforces the importance of proactive compliance measures. Strong anti-harassment policies, effective training, and well-functioning reporting and investigation processes are more critical than ever, as early intervention may help reduce the likelihood of claims that could foreclose arbitration altogether.