Labor & Employment Law Daily Wrap Up, DISCRIMINATION—SEXUAL HARASSMENT—3d Cir.: EFAA does not cover former CVS supervisor’s harassment claims, formation questions remain, (Apr 3, 2025)

By Jason Albright, J.D.

The employee alleged that, beginning in 2018, her manager “began to target [her] with severe and pervasive negative treatment, intentionally because she is a woman.”

A former CVS supervisor’s gender-based hostile work environment claims—concerning alleged sex-based harassment by her male manager that began in 2018—were not covered by the EFAA, the Third Circuit found. She submitted at least six written, internal complaints to CVS between September 2019 and June 2020, and accordingly, a “dispute” “arose” long before the EFAA’s March 3, 2022, effective date, the appeals court found. On remand, however, consideration of whether discovery into the validity of the arbitration agreement is warranted, said the court (Cornelius v. CVS Pharmacy Inc., No. 23-2961 (3d Cir. Apr. 2, 2025)).

40 years at CVS. The plaintiff began working for CVS as a cashier in 1982. Over the next 40 years, she “built an excellent reputation for operational discipline,” according to the court, and was eventually promoted to Store Manager of CVS Pharmacy store 2724 in June 2017.

Alleged harassment by manager. Beginning in 2018, however, her manager “began to target [her] with severe and pervasive negative treatment, intentionally because she is a woman.” He allegedly unfairly denied her promotions and pay increases, favored her male employees and counterparts, “abus[ed] [her] with rude and unnecessary text messages,” overworked her, and “undermin[ed]” her relationship with store employees.

Concerns raised in 2019. She raised concerns about her treatment with CVS in April 2019 during a meeting with her manager’s supervisor. At the meeting, she informed him of the manager’s conduct toward her.

Ignored. Her manager’s supervisor, however, “simply dismissed” her complaints and, to her knowledge, “neither [] [he], nor anyone at CVS, took any action against” the manager. She thereafter submitted many complaints to CVS, at least six in writing, regarding the manager’s conduct between September 2019 and June 2020. CVS, according to the plaintiff, “always arbitrarily and sexistly sided with [] [the manager], dismiss[ed] [her] complaints of discrimination, and utterly fail[ed] to remedy” the manager’s conduct.

Discharge. She submitted two resignation notices to the manager in October 2021, to which he did not respond. The manager then fired her on November 4, 2021.

Arbitration policy. In 2014, CVS introduced its Arbitration of Workplace Legal Disputes policy. Under the policy, employees are informed that all “Covered Claims” will be arbitrated. The policy further provides that “[e]mployees accept this Policy by continuing their employment after becoming aware of the Policy.” The policy does not describe how an employee can opt out or explicitly state that employees will forfeit their right to a trial.

Training course. Employees learned of the policy through a PowerPoint training course. The third slide of the course contains a hyperlink to the CVS Health Colleague Guide to Arbitration. The guide, in turn, contains a full copy of the arbitration policy, explains how employees can accept the terms of the policy, and explains how to opt out. After reviewing the guide, an employee must continue through the rest of the slides and “acknowledge[e]” that, among other things, the employee has “carefully read” the arbitration policy and “understand[s] that it applies to [the employee]”; the employee has “the opportunity, for a limited time only, to opt out of the Policy”; and that to opt out, the employee must send a written and signed letter to a specific address. The plaintiff completed the training course on October 8, 2014.

Lawsuit. On August 22, 2022, she filed a charge of discrimination with the EEOC, and she received her right-to-sue letter on February 15, 2023. She then filed a complaint in federal district court in New Jersey on April 3, 2023.

Compulsory arbitration and appeal. On May 23, 2023, CVS moved to compel arbitration and dismiss or stay, and the district court granted its motion. It concluded that she could not avoid arbitration under the EFAA because her claims did not constitute a “sexual harassment dispute.” It further held that the parties voluntarily entered into a valid and enforceable agreement to arbitrate and rejected the former supervisor’s unconscionability claim.

She timely appealed to the Third Circuit.

Applicability of EFAA. The appeals court first affirmed that the EFAA does not apply to her claims and affirmed as to this issue but based on a different rationale than that of the district court.

Specifically, the EFAA, by its terms, “shall apply with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act,” specifically March 3, 2022. But the former manager conceded that her “claim accrued” prior to her separation from CVS on November 4, 2021, well before the effective date of the EFAA.

Accordingly, the EFAA would shield her claims from arbitration only if her dispute arose on or after March 3, 2022, and the court found that it did not.

“Dispute.” A “dispute” under the EFAA, is not equivalent to an “injury,” the appeals court found, and it does not arise only at the filing of an external complaint. In the Third Circuit’s view, a “dispute…arises” “when an employee registers disagreement—through either an internal complaint, external complaint, or otherwise—with his or her employer, and the employer expressly or constructively opposes that position.”

Earlier arising… Applying this understanding, the appeals court had “no trouble concluding that [the former CVS supervisor’s] dispute arose prior to March 3, 2022.” According to her complaint, she submitted at least six written, internal complaints to CVS between September 2019 and June 2020. Moreover, as she alleged, “CVS always arbitrarily and sexistly sided with [her manager], dismiss[ed her] complaints of discrimination, and utterly fail[ed] to remedy [the] hostile work environment.”

This was enough to say that CVS disagreed with her position as to her manager’s conduct, said the court. Accordingly, a “dispute” “arose” while the former supervisor was still employed at CVS, “long before the EFAA’s March 3, 2022, effective date,” and her claims were not shielded from arbitration.

Contract formation questions. The Third Circuit nonetheless remanded because the district court applied a Rule 56 summary judgment standard, instead of the motion to dismiss standard, without considering whether discovery on arbitrability was warranted. And there remained a question whether discovery into the validity of the arbitration agreement is warranted under Fed. R. Civ. P. 56(d).

Remaining disputes. The former supervisor had “cited facts establishing…that [CVS’s] confusing arbitration[-]related-documents could easily…be misconstrued as a routine component of a training program.” And she asserted that the “training documents confusingly and unpredictably shift[] between inconsistent propositions on important arbitration-related provisions, including the right to legal counsel[.]” Finally, she alleged that there were “multiple material misrepresentations by [CVS] in their arbitration-related documents.” She also argued that the district court did not make a finding as to what documents—the Arbitration Policy, Policy Guide, and/or Training Course—constituted the arbitration agreement. In her view, the district court either “resolv[ed] all of these disputes against [her] in the absence of discovery[] or fail[ed] to acknowledge them at all.”

Some of these disputes—whether factual or legal—appeared to go to the heart of the agreement’s validity under New Jersey law, observed the appeals court. And the district court did not appear to consider New Jersey’s waiver-of-rights law or whether there were any factual disputes warranting discovery under Rule 56(d).

Remand. Though the district court intended to resolve CVS’s motion under Rule 12(b)(6), which would give it no occasion to consider whether discovery was warranted, its consideration of materials outside the complaint, observed the Third Circuit, placed its analysis within the realm of Rule 56 and the possible need for discovery. The district court’s dismissal order was thus vacated and remanded for consideration of whether discovery into the validity of the arbitration agreement is warranted under Rule 56(d) and for consideration of the plaintiff’s challenges to the arbitration agreement under New Jersey law.

The case is No. 23-2961.

Judge: Chung, C.

Attorneys: Alex G. Leone (Law Offices of Alex G. Leone) for Michele A. Cornelius. Kristine G. Derewicz (Littler Mendelson) for CVS Pharmacy Inc.

Companies: CVS Pharmacy Inc.

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