Labor & Employment Law Daily Wrap Up, ARBITRATION—9th Cir.: SpaceX can’t compel former employees to arbitrate claims they were fired for opposing sexual harassment, (Nov 12, 2026)

By Kathleen Kapusta, J.D.

By alleging SpaceX retaliated against them for opposing conduct that they asserted amounts to sexual harassment—Elon Musk’s Twitter posts—the employees alleged conduct constituting a sexual harassment dispute.

Rejecting SpaceX’s contention that the EFAA requires that sexual harassment allegations must state a claim that would survive a motion to dismiss under the federal pleading standard, a divided Ninth Circuit held that, in deciding whether the statute’s definition of “sexual harassment dispute” is satisfied, “courts must determine whether the plaintiff’s complaint describes conduct asserted to be a basis for a sexual harassment claim.” Affirming the denial of the company’s motion to compel arbitration of the employment-related claims of eight former employees who were fired after voicing concerns about sexually harassing conduct, the court found the EFAA applied to their case. Judge Tung dissented (Holland-Thielen v. SpaceX, No. 25-4811 (9th Cir. Nov. 10, 2026)).

The eight former employees alleged that sexual banter, sexual harassment, and gender discrimination were commonplace at the company during their tenure. They claimed that Elon Musk, the company’s founder, normalized and encouraged the conduct by drawing attention to his Twitter feed through his use of the account to report company news. According to the employees, he interspersed that news with sexually explicit posts, as well as posts that demeaned women and LGBTQ individuals.

Open letter and terminations. Through an open letter to management that focused on Musk’s Twitter posts, which they asserted constituted sexual harassment, the employees voiced their concerns about SpaceX’s work environment and its process for addressing alleged misconduct. The day after they circulated the letter, the company fired four of the employees who had publicly identified themselves as its authors. Its stated reason for firing them was their role in “conceiving, writing, and distributing the Open Letter.” The four remaining employees were fired after an investigation revealed their participation in drafting the letter.

Lawsuit. The employees sued in state court, asserting various claims under California law relating to their employment conditions and terminations, including hostile work environment sexual harassment claims created by Musk’s Twitter posts. Not all employees asserted the same claims, but the sole claim common to all eight was a retaliatory termination claim.

Lower court proceedings. SpaceX removed the case to federal court and then moved to compel arbitration under the Federal Arbitration Act. The district court denied the motion.

Sexual harassment dispute. On appeal, Space X first argued that the employees’ allegations did not satisfy EFAA Section 401(4)’s definition of “sexual harassment dispute” as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” Looking to the ordinary meanings of “allege” and “constitute,” the court found the phrase “conduct that is alleged to constitute sexual harassment” means “conduct that is asserted to amount to sexual harassment.” The word “allege,” said the court, requires only an assertion that may or may not eventually be proven meritorious. As a result, according to Section 401(4)’s plain terms, the court continued, “are not limited to conduct that certainly amounts to sexual harassment.”

Federal pleading standard. While SpaceX argued that Section 401(4) requires that allegations of sexual harassment must meet the federal pleading standard in the sense of being able to survive a motion to dismiss for failure to state a claim, the court pointed out that the EFAA’s language makes no reference to the federal pleading standard, which is set forth in Federal Rule of Civil Procedure 8. The Supreme Court, the court here observed, has interpreted Rule 8 to require “adequate” allegations, meaning the complaint must contain sufficient nonconclusory factual allegations to state a claim for relief that is plausible on its face. The EFAA’s definition of “sexual harassment dispute,” however, does not say that a plaintiff must “adequately allege” sexual harassment, “state a claim to relief that is plausible on its face,” or provide a “short and plain statement” showing entitlement to relief.

Rejecting SpaceX’s contention that when the EFAA was passed, it was firmly settled under federal law that a plaintiff ’s complaint needs to provide the grounds of his entitlement to relief to survive a motion to dismiss, the court noted that when Congress wants to require allegations that meet the federal pleading standard, it has typically said so expressly and, here, it did not do so. Undeterred, SpaceX argued that under certain circumstances, statutory terms can carry meanings that depart from their ordinary ones.

Adequately alleged. Specifically, it contended, “alleged,” must mean “adequately alleged” when read in context under Section 401(4), which requires conduct “alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.” The “under applicable law” clause, it asserted, requires alleging that certain conduct violates the law. An allegation that conduct violates the law is a legal conclusion, the company said, and for a complaint to survive a motion to dismiss under the federal pleading standard, legal conclusions are not enough. Rather, they must be supported by sufficient factual allegations.

Unpersuaded, the court again pointed out that because Congress has expressly incorporated the federal pleading standard in other statutes, its choice to not do so in Section 401(4) must have been intentional. Moreover, observed the court, courts frequently state that a plaintiff “alleged” a legal violation without implying that the allegations are sufficient to state a claim. But when analyzing whether allegations meet the pleading standard, courts typically have used the “adequately” or “plausibly” to clarify that they are not referring to mere allegations.

“There is no reason to believe Congress used ‘allege’ in a more technical sense than how courts typically use it,” said the court, explaining that Section 401(4)’s “‘under applicable Federal, Tribal, or State law’ clause simply makes clear that a plaintiff must contend that there was a legal violation under an applicable part of one of those bodies of law (as opposed to, for example, under foreign law or a law unrelated to sexual harassment).”

Constitute. Nor was the court persuaded by SpaceX’s contention the word “constitute” in Section 401(4) imposes the federal pleading standard. According to SpaceX, the normal meaning of constitute—to make up or form—means the plaintiff must set forth allegations of conduct that would establish sexual harassment under applicable law. While the court agreed that might be a reasonable conclusion if the EFAA defined a sexual harassment dispute as a dispute relating to “conduct that constitutes sexual harassment” under applicable law, “that is not the definition Congress provided.” Rather, “sexual harassment dispute” is defined as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law.”

Also rejected was SpaceX’s contention that the special meaning of “allege” is “clear” when one examines Section 4 of the FAA, which provides that “A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate... may petition” a court for an order compelling arbitration. According to SpaceX, “merely alleging the failure, neglect, or refusal is insufficient if the opposing party is not actually failing, neglecting, or refusing to arbitrate.”

But the text of Section 4, said the court, makes clear that to invoke the FAA in the first place and file a petition, a party must only assert that its adversary is improperly refusing to arbitrate. To ultimately obtain an order compelling arbitration, however, the petitioner must prove that its adversary actually refused to arbitrate despite a valid arbitration agreement.

Undesirable consequences. Finally, SpaceX argued that if the definition does not impose the federal pleading standard, plaintiffs will be able to avoid arbitration by “plac[ing] a ‘sexual harassment’ label on conduct that does not actually constitute sexual harassment.” “But there is an obvious remedy for that problem,” said the court, “the defendant may file a motion to dismiss.” And while SpaceX protested that defendants should not be required to “file a separate 12(b)(6) motion as to any purported sexual harassment claims,” the court found its aversion to filing a Rule 12(b)(6) motion difficult to understand.

“Ultimately,” the court observed, “SpaceX’s arguments reflect a preference for arbitration as a forum.” Congress, however, “enacted the EFAA specifically to override that preference and to permit sexual misconduct claims to proceed in court.”

EFAA properly invoked. Turning to whether the employees here properly invoked the EFAA, the court found that by alleging SpaceX retaliated against them for opposing conduct they claimed amounted to sexual harassment—Musk’s Twitter posts—they “alleg[ed] conduct constituting” a “sexual harassment dispute.” Where, as here, the court explained, an employer allegedly punishes an employee for opposing alleged unlawful sexual harassment and the employee challenges her punishment, their dispute over the retaliation is directly connected to “conduct that is alleged to constitute sexual harassment.”

For similar reasons, the court found the employees’ case “relates to” that sexual harassment dispute. To satisfy the “relates to” standard, the court explained, a plaintiff must assert at least one claim premised on a “sexual harassment dispute.” And here, because each employee brought a claim challenging their terminations that were allegedly in response to their accusations about sexual harassment, each met the “relates to” bar and thus invoked the EFAA with respect to an “entire case.”

Rejecting SpaceX’s contention that retaliation for opposing alleged sexual harassment is not a “sexual harassment dispute” because it is not itself “sexual harassment,” the court noted that the definition of “sexual harassment dispute” is “not limited to sexual harassment; it includes ‘dispute[s] relating to conduct that is alleged to constitute sexual harassment,’” and retaliation for opposing alleged sexual harassment falls within that definition.

Dissent. Dissenting, Judge Tung argued that “in refusing to enforce an arbitration agreement, the majority adopts the opposite view: an employee can evade arbitration simply by saying that the dispute is about sexual harassment—even if the conduct alleged would not remotely constitute sexual harassment under the law.” According to Judge Tung, the provisions of the EFAA, taken together, “paint a clear picture: courts are to assess whether plaintiffs have pleaded facts that, if proven true, would constitute sexual harassment under applicable law.”

The case is No. 25-4811.

Judge: Friedland, M.

Attorneys: Anne Shaver (Lieff Cabraser Heimann & Bernstein) for Paige Holland-Thielen, Yaman Abdulhak, Scott Beck, Rebekah Clark, Deborah Lawrence, Claire Mallon, Andre Nadeau, and Tom Moline. Karen Cho (Morgan, Lewis & Bockius) for SpaceX and Elon Musk.

Companies: SpaceX

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