Labor & Employment Law Daily Wrap Up, ARBITRATION—N.D. Cal.: Gaming company product manager must arbitrate harassment, retaliation, and wage claims, (Jul 30, 2026)

By Mandavi Singh, LL.M.

The allegations did not plausibly establish severe or pervasive sexual harassment, leaving the EFAA unavailable to invalidate her pre-dispute agreement under California law.

A Tencent America product manager was required to arbitrate her harassment, retaliation, discrimination, equal pay, and wage claims after a federal district court in California found her allegations did not plausibly establish sexual harassment under California law. The court also denied her motion to remand, terminated a separate dismissal motion as moot, and stayed the action pending arbitration (Ai v. Tencent America LLC, No. 26-cv-02498-NW (N.D. Cal. July 28, 2026)).

Employment dispute. Tencent America, a gaming company owned by a multinational technology conglomerate headquartered in China, employed the product manager in its Palo Alto office beginning in May 2023. During onboarding, she signed an at-will employment agreement requiring arbitration of all controversies, claims, or disputes arising from her employment, her relationship with Tencent, or the termination of that relationship.

Shortly after she began working for Tencent, the product manager allegedly experienced inappropriate, unprofessional, and gender-based conduct from a senior engineer who reported to the same manager. Although the engineer did not supervise her, she alleged that he exercised influence within the team and maintained a close professional relationship with their manager.

The employee claimed that the engineer made sexually suggestive remarks through Tencent’s WeCom workplace communication system and during team meetings. When she once requested a work document, he allegedly responded, “Let me put on my pants first.” He also allegedly referred to colleagues using slang terms for sexual threesomes and called the employee “boss’s wife” and “landlady who collects rent.”

The engineer also allegedly belittled the product manager in workplace chats and team settings by accusing her of “yelling,” telling her to mind her own business, and asserting that vendors were pushing her around. Some coworkers purportedly expressed concern privately about her well-being and the inappropriate tone of the engineer’s workplace communications.

HR complaint. The product manager submitted a formal complaint to HR in July 2024. An HR representative informed her the following month that misconduct had been confirmed, and HR subsequently conducted a meeting with the team concerning workplace behavior. According to the complaint, the product manager thereafter experienced retaliatory treatment from her manager. She was excluded from meetings concerning initiatives that she had led, reassigned without notice to a less important project, and stripped of her budget-management authority.

In May 2025, she contacted a senior HR employee to discuss her ongoing treatment and to provide feedback that she was “bad at teamwork.” Eight days later, HR informed her that Tencent had eliminated her role and that her employment would end the following day.

The employee sued in California state court, alleging sexual harassment, retaliation, age discrimination, failure to prevent discrimination and harassment, violations of the California Equal Pay Act, whistleblower retaliation, and failure to pay overtime. Tencent and the engineer removed the action under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention). Tencent then moved to compel arbitration, while both respondents separately sought dismissal of the harassment claim.

Federal jurisdiction. The employee argued that 9 U.S.C. §§401-402 rendered the arbitration provision unenforceable and therefore eliminated the asserted basis for federal jurisdiction. The court rejected the contention that enforceability controlled the jurisdictional inquiry. Citing Infuturia Global Ltd. v. Sequus Pharmaceuticals, Inc., 631 F.3d 1133, 1138 (9th Cir. 2011), the court explained that the phrase “relates to” in the Convention’s removal provision is construed broadly and provides sweeping removal jurisdiction.

At the remand stage, Tencent needed to establish only that a court could find the arbitration provision governed the dispute. That requirement was met because the employee’s claims arose directly from her employment and discharge (matters expressly covered by the agreement). Whether the EFAA ultimately made the provision unenforceable was a separate question for the motion to compel arbitration.

The court next considered whether the agreement fell under the Convention. Relying on Ministry of Defense of the Islamic Republic of Iran v. Gould Inc., 887 F.2d 1357, 1362 (9th Cir. 1989), it observed that an arbitration agreement qualifies when it arises from a legal relationship that is commercial in nature and not entirely domestic in scope.

All three requirements were satisfied. The agreement arose from the parties’ employment relationship, the product manager worked with international teams on multinational projects, and Tencent America was wholly owned by a China-headquartered technology conglomerate. The employee was also a lawful permanent resident rather than a United States citizen. The court therefore found that the agreement related to the lawsuit and fell under the Convention, making removal proper under 9 U.S.C. §205.

EFAA standard. Turning to the motion to compel arbitration, the court acknowledged disagreement among federal courts over what allegations are necessary to invoke the EFAA. The statute permits a person alleging conduct constituting a sexual-harassment or sexual-assault dispute to elect not to enforce a pre-dispute arbitration agreement.

Following Van De Hey v. EPAM Systems, Inc., No. 24-cv-08800-RFL, 2025 WL 829604, at *3 (N.D. Cal. Feb. 28, 2025), the court applied the Rule 12(b)(6) plausibility standard to determine whether the employee had alleged a qualifying sexual-harassment dispute. The EFAA’s reference to conduct “alleged to constitute” sexual harassment implicitly incorporated the familiar pleading standard, the court reasoned. Applying a more permissive standard could enable a litigant to avoid an otherwise binding arbitration agreement merely by adding a facially unsustainable harassment allegation. The court also found no undue prejudice because the employee had years to gather information supporting her claim and had elected to rely on her original complaint without amendment. If information uncovered during arbitration later strengthened the harassment allegations, she could seek to lift the federal stay and renew the issue.

Harassment allegations. Under the California Fair Employment and Housing Act, actionable harassment must be sufficiently severe or pervasive to alter the conditions of employment and create a hostile working environment. Courts assess the totality of the circumstances, including the frequency, severity, and nature of the conduct.

Citing Bailey v. San Francisco District Attorney’s Office, 16 Cal. 5th 611, 628-630 (2024), the court recognized that one or two comments may support a harassment claim when they are sufficiently severe. The employee’s allegations, however, were not comparable to the unambiguous epithet at issue in Bailey, which the California Supreme Court found could create a triable harassment issue even when used only once.

Although troubling, the three identified comments did not independently demonstrate sexual harassment. The complaint did not specify whether other sexually suggestive comments occurred more than those three times during the employee’s two-year tenure, nor did it provide further facts showing that the conduct was pervasive. Nor did it allege unwanted sexual advances or physical or visual harassment of a sexual nature. The product manager’s exclusion from meetings, reassignment, and loss of budget authority also did not supply the missing harassment allegations. Those were personnel-management decisions involving project assignments, supervisory responsibilities, and meeting participation rather than harassing conduct.

Because the employee did not plausibly allege severe or pervasive sexual harassment, she could not invoke the EFAA to avoid the predispute agreement. The court compelled all claims to arbitration, stayed the litigation under 9 U.S.C. §3, and directed the parties to report on the arbitration’s status every 180 days.

The case is No. 26-cv-02498-NW.

Judge: Wise, N.

Attorneys: Sarah Rebecca Nichols (Nichols Law) for Su Ai. Kristina M. Launey (Seyfarth Shaw) for Tencent America LLC and Yunshan Zhu.

Companies: Tencent America LLC

Cases: Arbitration SexualHarassment StateLawClaims Discharge Procedure CaliforniaNews