Labor & Employment Law Daily Wrap Up, ARBITRATION—9th Cir.: EFAA allows former CFO to litigate newly discovered sexual harassment claim despite initially pursing arbitration, (Aug 20, 2026)

By Kathleen Kapusta, J.D.

“The plain text of the EFAA does not limit when a plaintiff may allege a sexual harassment claim or exercise her rights under the EFAA.”

The EFAA allows a plaintiff to make an election to proceed in court upon discovering a sexual harassment claim even if she had initially pursued other claims in arbitration, the Ninth Circuit declared, allowing a former CFO for a clinical drug development company—who had participated in arbitration proceedings for over a year before discovering that her workplace mistreatment was motivated because of her sex—to elect to end arbitration and proceed in court. Further, held the court, a sex-based hostile work environment claim under the FEHA is a “sexual harassment dispute” under the EFAA. Dissenting, Judge Rawlinson was “unpersuaded that [the CFO’s] belated invocation of the EFAA was in conformance with the provisions of the statute” (Ding v. Structure Therapeutics, Inc., No. 25-1532 (9th Cir. Aug. 19, 2026)).

Ideal phenotype. When the company, in 2021, began a search for a CFO to take it through an initial public offering (IPO), the CEO circulated an email outlining his “ideal phenotype” for the position, suggesting, as an example, two men with investment banking backgrounds. Because the board of directors, however, preferred to emphasize diversity in its recruitment efforts to appeal to third-party investors, the company hired a woman with a pharmacology Ph.D. and over 20 years of experience in biopharmaceutical equity research and investment banking at multiple leading global investment banks in Asia and the United States.

Almost immediately, she claimed, the CEO began sidelining her, directing her to “read and listen” for the first year, assigning her responsibilities already being performed by others, and dismissing her contributions and suggestions for improvement. In January 2022, the CEO told her that Wall Street bankers servicing the company’s IPO complained she was “too aggressive” and “lectured them.” According to the CFO, she never raised her voice in any communications with the bankers.

Domestic violence incident. In March, the CFO suffered “visible injuries to her face and eye” as a result of a domestic violence incident. She told the CEO about the incident the next day and suggested that she skip an internal Zoom call that afternoon due to her physical injuries and meetings with police officers. In response, he told her that he “could hardly see anything. You may be more sensitive to it than others.”

Terminated. Although the CFO later indicated she was ready to resume work as normal, the CEO strongly advised her not to travel to San Francisco the next week to attend week-long executive meetings. When she went anyway, he repeatedly asked her “if she wanted to reconsider her role as CFO given her transition in life.” Days later, he recommended her termination to the board of directors, who accepted the recommendation.

Arbitration. The CFO then filed an arbitration demand, as required by her employment contract, asserting claims for discrimination, retaliation, and harassment based on her national origin and status as a domestic violence victim. Over the course of a year, the parties attended preliminary hearings, began discovery, stipulated to a protective order, and litigated discovery disputes. The CFO ultimately withdrew from arbitration due to the company’s late payment of arbitration fees.

Lawsuit. As a result of the discovery that took place during and after arbitration, she learned about the CEO’s “phenotype” email listing two men, the board’s gender diversity goal in CFO hiring, and his reliance on male bankers’ complaints in terminating her. She then sued, asserting a sex discrimination claim and a sex-based hostile work environment claim in violation of California’s Fair Employment and Housing Act (FEHA) as well as a discrimination claim based on her status as a domestic violence victim.

Lower court proceedings. The company moved to compel arbitration and the CFO argued that the arbitration agreement was invalid and unenforceable under the EFAA. The district court ultimately denied the motion to compel, holding that the CFO properly elected to exercise her rights under the EFAA based upon plausible allegations of sexual harassment under New York law.

Not categorically barred. On appeal, the Ninth Circuit noted that the EFAA permits a plaintiff who is “alleging conduct constituting a sexual harassment dispute or sexual assault dispute” to “elect” to render a pre-dispute arbitration agreement invalid and unenforceable. Turning to the company’s assertion that a plaintiff is categorically barred from making an EFAA election if she first files other claims in arbitration, the appeals found the text of the EFAA does not limit when a plaintiff may allege a sexual harassment claim or exercise her rights under the statute. To the extent it references timing, said the court, it suggests only that a plaintiff may not make her “election” until the time she is “alleging conduct constituting a sexual harassment dispute or sexual assault dispute.”

One election. Disagreeing with the dissent’s contention that the CFO was entitled to only one election under the EFAA and that she “made [her] election to proceed to arbitration rather than litigating in court,” the majority explained that when the CFO initially filed her arbitration demand, she was not a “person alleging conduct constituting a sexual harassment dispute.” Rather, her arbitration demand was based on her national origin and domestic violence victimhood discrimination and harassment claims.

Because she did not become aware that the harassment was based on her sex and sexism until she obtained discovery after the commencement of arbitration proceedings, she could not have triggered an “election” under the EFAA by filing an arbitration demand with nonsexual harassment claims. “Under the facts of this case,” said the court, the CFO “made an election only one time—when she chose to pursue the newly discovered sexual harassment claim by filing her claims in federal court.”

Legislative history. Pointing out that the legislative history of the EFAA emphasized giving victims of sexual harassment “a real choice” to bring their claims in court, the Ninth Circuit noted that under the company’s reading of the statute, “a plaintiff could lose her ability to have her sexual harassment claim heard in court before she knows she has such a claim. Such an interpretation would deprive individuals who uncover a sexual harassment claim during discovery of the choice the EFAA was enacted to provide.”

Waiver. Rejecting the company’s contention the CFO waived her right to proceed in court by demanding arbitration even though she was aware of the facts underlying her sexual harassment claim, the appeals court pointed to the district court’s finding, which was not clearly erroneous, that she did not know she had a plausible sexual harassment claim but intentionally chose not to bring the claim when she initiated arbitration. Because she was unaware she had a plausible sexual harassment claim when she filed in arbitration, she did not waive her right to pursue her claims in court.

Plausible claim. Finally, the company argued that the CFO failed to state a plausible sexual harassment claim within the meaning of the EFAA. Assuming without deciding that the EFAA requires a plaintiff to plausibly plead a sexual harassment claim, the court noted that FEHA makes it unlawful “[f]or an employer... because of... sex... to harass an employee...” and further states that “‘harassment’ because of sex includes sexual harassment” and “[s]exually harassing conduct need not be motivated by sexual desire.” Because it is “the disparate treatment of an employee on the basis of sex... that is the essence of a sexual harassment claim,” said the court, quoting the California Supreme Court, a sex-based hostile work environment claim amounts to sexual harassment under California law even when the harassing conduct is not sexual in nature.

Drawing all reasonable inferences in the CFO’s favor, the court found she plausibly pled a sex-based hostile work environment claim under FEHA. As to the severe or pervasive requirement, she alleged the CEO wanted to hire a man for the CFO position, hired her due to the board’s emphasis on gender diversity, immediately began sidelining her and diminishing her job responsibilities, and adopted sexist, unsupported criticisms made by Wall Street bankers that she was too aggressive despite the fact that “Wall Street investment bankers are known for their aggressiveness.”

Far cry. She also alleged the CEO made light of her facial injuries from the domestic violence incident and told her that she “may be more sensitive to it than others,” while repeatedly questioning her ability to continue her CFO job after that incident and preventing her from attending executive meetings. He terminated her shortly after that and provided no performance related issues but instead called “out [her] domestic situation as a factor” for the termination. “The continuous sidelining, gendered criticisms and mistrust, and ultimate termination of [the CFO] was a far cry from ‘[s]imple teasing, offhand comments, and isolated incidents,’” the court reasoned.

His alleged preference for a male CFO, reiteration of sexist remarks, belittling of her domestic violence experience, and comment about her inability to continue her job all supported an inference that his conduct toward her was plausibly based on her sex, the court stated, finding she was entitled to bring her entire case in court.

Dissent. Judge Rawlinson dissented from the majority’s holding that an employee may proceed with an action under the EFAA after first electing to proceed with arbitration and engaging in significant litigation in the arbitration forum. The majority’s reading of the EFAA, he argued, “conflicts with the plain language of the statute, the legislative history, the commonly accepted legal definition of the term ‘election,’ and our precedent addressing waiver in the arbitration context.”

The case is No. 25-1532.

Judge: Sanchez, G.

Attorneys: Melissa Zonne (Boies Schiller Flexner) for Ding Ding. Audrey J. Mott-Smith (Cooley) for Structure Therapeutics, Inc.

Companies: Structure Therapeutics, Inc.

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