Labor & Employment Law Daily Wrap Up, ARBITRATION—S.D.N.Y.: Court holds EFAA bars arbitration of entire employment suit based on plausibly pleaded sexual harassment claim, (Sep 14, 2026)

By Wendy Biddle, J.D.

The ruling blocks enforcement of a predispute arbitration agreement and keeps the employee’s discrimination, harassment, and retaliation claims in court.

A federal court in the Southern District of New York denied motions to compel arbitration filed by ByteDance, Inc. (the parent company of TikTok Ltd.) and two of its former supervisory employees, in response to a lawsuit filed by a Black female employee alleging that her supervisor made multiple inappropriate comments that were sexual in nature, that the supervisors treated her differently than white employees and called her racial slurs behind her back, and that when she reported the conduct, they retaliated against her. The court concluded that the employee’s harassment allegations satisfied the pleading threshold required to invoke the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) and that, once triggered, the statute invalidates the predispute arbitration agreement (Matima v. Bytedance Inc., No. 1:25-cv-10213-PAE (S.D.N.Y. Sept. 11, 2026)).

The plaintiff, a Black woman and magna cum laude graduate of Fordham University and the University of Massachusetts Law School, worked as a business development representative in ByteDance's Lark Division from July 25, 2022, until her termination on August 11, 2023. She sued ByteDance and two of her supervisors alleging race and gender discrimination, sexual harassment, and retaliation under the New York State Human Rights Law and the New York City Human Rights Law.

Harassment began during off-site visit. Her sexual harassment allegations center on a series of escalating incidents involving her first supervisor that began during an August 2022 off-site visit to ByteDance's California headquarters. Over the course of two days, she alleges, the supervisor stared at her body while she wore a dress, pressured her to sit next to him at lunch, and whispered to her about her attire and relationship status. She also alleges that he knocked on her hotel room door near midnight, and the following morning leaned over her desk and told her she should have let him in.

She contends that the harassment continued in the months that followed, with the supervisor calling the employee on her personal phone in late October 2022 and suggesting she make "other arrangements" with him as he does "with the other girls," calling her a prude, and telling her life would be easier if she gave him what he wanted. In November 2022, he called her again after hours and warned her to stop playing hard to get or he would give her a bad report to her next hiring manager.

“Black Snake” slur. As for the employee's race discrimination allegations, they describe a pattern of differential treatment that began from the moment the employee was hired as the only Black business development representative on the employer’s 40-person North American sales team. Her supervisor required her to begin sales outreach immediately while white colleagues were given time to complete mandatory training. She was also assigned 75 percent of the team's sales goals while her three non-Black colleagues shared the remaining 25 percent. A colleague later informed the employee that the two supervisors routinely referred to the employee using the racial slur "Black Snake," and that her second supervisor had used an additional racial slur to describe her as well.

Retaliation. Her retaliation claims arise from the employer’s and the supervisors' alleged responses to three internal complaints the employee filed between August 2022 and June 2023. Following those complaints, the employee alleges she was reassigned hundreds of low-quality sales leads, denied a quarterly bonus she had earned, subjected to a negative performance review she characterized as false and procedurally irregular, excluded from meetings, and had her internal transfer approval mysteriously revoked. Her second supervisor allegedly canceled all one-on-one meetings with her, deleted records of their communications, locked her out of the system where those records were kept, and scheduled mandatory after-hours calls for which she was threatened with paid time off for missing. The employee was ultimately terminated on August 11, 2023.

Arbitration agreement. At the outset of her employment in July 2022, the employee had executed an arbitration agreement covering all disputes arising out of or relating to her employment, including claims of retaliation, discrimination, and harassment. The defendants moved to compel arbitration on the basis of that agreement. The employee countered that the EFAA, 9 U.S.C. §§ 401-02, bars its enforcement.

Here, the court explained the now well-settled principle that the EFAA amends the Federal Arbitration Act to render predispute arbitration agreements unenforceable at the election of the plaintiff in any case relating to a sexual harassment dispute. The court emphasized that applicability of the EFAA is a question for a court, not an arbitrator, and that when the EFAA applies, it invalidates the arbitration agreement as to the plaintiff's entire case, not merely the discrete sexual harassment claims. The court noted that this broader rule has been followed by multiple circuits and district courts and that it was unaware of contrary federal authority.

Because the claims arose under the New York City Human Rights Law (NYCHRL) and the New York State Human Rights Law (NYSHRL), and because the NYCHRL's liability standard is equal to or lower than the NYSHRL's, the court focused its analysis on the NYCHRL under which a plaintiff must allege facts showing she was subjected to unwanted gender-based conduct and treated less well than other employees because of her gender.

Timeliness and continuing violation. The court also ruled that, contrary to the employer’s argument, the NYCHRL's three-year limitations period ran from October 10, 2025, which was the date the employee filed her initial summons with notice in New York State Supreme Court. It explained that under New York's CPLR, an action is commenced upon the filing of a summons with notice, and that defendants could not leverage removal to federal court to shift the limitations start date or to impose federal pleading standards on a state-court filing. Further, it held that the continuing violation doctrine allowed it to consider the supervisor’s August 2022 conduct, which predated the October 10, 2022, limitations cutoff, because the October and November 2022 acts within the limitations period were not dissimilar or sporadic; they were continuations of the same course of sexualized pursuit, now escalated by an implicit threat of professional retaliation for the employee's continued refusals.

Sexual harassment sufficiently alleged. As for the complaint, the court concluded that it stated a sexual harassment claim. The supervisor’s conduct progressed from unwanted sexualized attention and comments about the employee's appearance and relationship status, to a late-night appearance at her hotel room, to explicit propositions tied to professional consequences for non-compliance. The court acknowledged the complaint lacked some features common to stronger NYCHRL claims but observed that under the NYCHRL, even a single comment can suffice, and that the employee’s complaint alleged considerably more than that. The court also rejected ByteDance's argument that the employee's failure to include sexual harassment allegations in her internal complaints or EEOC charge undermined her claim, characterizing those challenges as credibility arguments inappropriate for resolution at the pleading stage.

Party-specific argument. Finally, the court denied the second supervisor's separate argument that the EFAA should apply only on a party-specific basis and that, because no sexual harassment claim was brought against him, he should be able to enforce the arbitration agreement. Relying on the text of the EFAA and its own precedent in Johnson v. Everyrealm, 657 F. Supp. 3d 535 (S.D.N.Y. 2023), the court held that once the statute applies to a sexual harassment claim in a case, it blocks arbitration as to the entire case and all defendants. Because the employee's case includes a plausibly pled sexual harassment claim, the arbitration agreement is unenforceable in its entirety.

The court also denied the supervisor's motion to dismiss the NYCHRL sexual harassment claim, finding the holding on EFAA applicability necessarily resolved that question in the employee's favor. The remaining motions to dismiss filed by the individual defendants were left pending, with the court setting a briefing schedule to follow.

The case is No. 1:25-cv-10213-PAE.

Judge: Engelmayer, P.

Attorneys: Matthew L. Berman (Valli Kane & Vagnini) for Nnete Matima. Demetra Makris (Greenberg Traurig) for ByteDance, Inc. d/b/a TikTok. Ivan Ross Novich (Littler Mendelson, P.C.) for Allen Adjamian and Ahmad Fayad.

Companies: ByteDance, Inc.; TikTok

Cases: Arbitration SexualHarassment RaceDiscrimination Discrimination Discharge Retaliation StateLawClaims CoverageLiability NewYorkNews GCNNews