On August 19, 2026, the Ninth Circuit told California employers that an employee who spent a year arbitrating her discrimination claims, took discovery, and then walked away can file a fresh sexual harassment lawsuit in court and pull the rest of her case out of arbitration with it. The decision is Ding v. Structure Therapeutics, Inc., No. 25-1532 (9th Cir. Aug. 19, 2026), and for a warehouse operator in Fontana or a medical group in Roseville it changes what an arbitration agreement actually buys.
What happened in Ding v. Structure Therapeutics?
Structure Therapeutics hired Dr. Ding Ding as its CFO in December 2021 under an agreement sending all disputes to arbitration. The company terminated her in March 2022, days after she was injured in a domestic violence incident. Her October 2022 arbitration demand alleged national origin discrimination and mistreatment tied to her status as a domestic violence victim, not sex.
Discovery turned up an email from the CEO describing male candidates as the preferred “phenotype” for the job and signs he relied on complaints from male investment bankers when he let her go. In October 2023 she withdrew, citing the company’s late payment of arbitration fees. In March 2024 she sued in California Superior Court for sex discrimination and a sex-based hostile work environment under Cal. Gov. Code § 12940. The company removed the case and moved to compel arbitration; the district court refused and a divided panel affirmed.
Why didn’t filing in arbitration first count as an EFAA election?
The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, 9 U.S.C. § 401 and 9 U.S.C. § 402, says that “at the election of the person alleging conduct constituting a sexual harassment dispute,” no predispute arbitration agreement is enforceable “with respect to a case” relating to that dispute. The employer argued she got one election and used it in 2022.
The majority disagreed. An election is a choice among options, and in October 2022 Dr. Ding had none: she was not yet “alleging conduct constituting a sexual harassment dispute,” so the clause bound her. Her only election came in March 2024. Congress passed the EFAA to give victims “a real choice,” which cannot be forfeited before a plaintiff knows she has a claim.
Ordinary waiver doctrine still applies: a plaintiff who knows the facts supporting a harassment claim and either sits on it or deliberately arbitrates it can lose her EFAA rights. Judge Rawlinson, dissenting, would have treated a year of active arbitration as a knowing choice of forum.
Does one harassment claim pull the whole case out of arbitration in California?
Yes. Because the statute voids the agreement “with respect to a case,” not a claim, Dr. Ding’s domestic violence claims left arbitration with the sex-based claims. The panel relied on Bruce v. Adams & Reese, LLP, 168 F.4th 367 (6th Cir. 2026).
California courts got there first. Doe v. Second Street Corp., 105 Cal.App.5th 552 (2024), held that a FEHA hostile work environment claim is a “sexual harassment dispute” and that the EFAA blocks arbitration of every claim in the case, wage claims included. Liu v. Miniso Depot CA, Inc., 105 Cal.App.5th 791 (2024), agreed where the harassment was comments about the plaintiff’s gender expression and sexual orientation. The United States Supreme Court denied review in Liu on October 6, 2025.
How does the EFAA fit with FEHA and AB 51 after Chamber of Commerce v. Bonta?
AB 51, Cal. Lab. Code § 432.6, tried to bar mandatory arbitration. The Ninth Circuit held in Chamber of Commerce v. Bonta, 62 F.4th 473 (9th Cir. 2023), that the Federal Arbitration Act preempts it, and the statute is now permanently enjoined.
The EFAA is a carve-out from the FAA itself, so preemption is no defense. Section 402(b) adds that a court, not an arbitrator, decides whether the EFAA applies, delegation clause or not. And because FEHA harassment liability reaches employers of any size under § 12940(j), a California plaintiff can trigger the statute with a FEHA claim alone.
What does the arbitration fee deadline in CCP § 1281.98 have to do with this?
Dr. Ding left arbitration over late fee payments. Cal. Civ. Proc. Code § 1281.98 makes an employer’s failure to pay fees within 30 days after the due date a material breach. The employee may then withdraw, sue in court with the limitations period tolled, and recover her arbitration costs, and the court must impose sanctions.
The California Supreme Court softened the rule in Hohenshelt v. Superior Court (Cal. Aug. 11, 2025), holding that § 1281.98 survives FAA preemption but that relief from forfeiture under Civil Code § 3275 and CCP § 473(b) remains available for an inadvertent late payment. A willful or grossly negligent default still forfeits the forum. Put Ding and § 1281.98 together: a slipped invoice hands the employee an exit, and the EFAA lets her rebuild the case in court.
What should a Riverside employer with 40 employees do now?
Take a Riverside HVAC contractor with 40 employees. Under Cal. Gov. Code § 12950.1, supervisors need two hours of harassment prevention training and everyone else one hour, every two years, with new hires trained within six months. The agreement should carve out EFAA-covered claims by name, and its severability clause should say that if federal law excludes any claim or case from arbitration, the parties arbitrate what remains and litigate the rest.
| Situation | Can the employer compel arbitration? | Authority | Practical note |
|---|---|---|---|
| Wage claim only, no harassment allegation | Yes, if the agreement is enforceable | Chamber v. Bonta | AB 51 enjoined; FAA governs |
| FEHA sexual harassment claim in court | No, at the employee’s election | 9 U.S.C. § 402(a); Doe | Court, not arbitrator, decides |
| Harassment plus unrelated wage claims | No, entire case stays in court | Liu; Ding | Cert denied in Liu, Oct. 2025 |
| Employee arbitrated other claims, then found sex-based facts | No, absent knowing waiver | Ding | Document what she knew and when |
| Fees paid more than 30 days late | Only with relief from forfeiture | CCP § 1281.98; Hohenshelt | Sanctions follow willful default |
What does the worked example look like in dollars?
Same contractor. A service coordinator terminated in August 2025 files a JAMS demand in February 2026 for retaliation and unpaid overtime. The employer pays $43,500 in JAMS filing, arbitrator, and case management fees and about $60,000 in defense fees. In September 2026 an email produced in discovery shows the dispatch supervisor rating female coordinators on appearance and calling her “too emotional to keep.” She withdraws in October 2026 and files a FEHA harassment and sex discrimination complaint in Riverside Superior Court, retaliation and overtime claims included.
Under Ding, Doe, and Liu, the employer cannot compel arbitration of any of it unless it proves she knew the sex-based facts in February. The $103,500 spent bought a discovery record the plaintiff will reuse. If the August invoice also went out 35 days late without an excuse that satisfies Hohenshelt, § 1281.98 adds her arbitration costs and a mandatory sanction.
What does an attorney-CPA see that a pure litigator might miss?
First, any settlement subject to a nondisclosure agreement runs into 26 U.S.C. § 162(q), which denies a deduction for a settlement or payment “related to sexual harassment or sexual abuse” that is subject to an NDA, and for the attorney’s fees tied to it. A $150,000 confidential settlement of a mixed case can cost an S corporation owner in the 37 percent federal bracket more than $55,000 in lost deductions unless the agreement allocates, defensibly, what is being paid for what.
Second, arbitration fees are a cash-flow item most small employers never budget. Under California’s Armendariz rule the employer bears the costs unique to arbitration, and a company that pays provider invoices on a 45-day cycle is one late check away from a § 1281.98 default.
Frequently Asked Questions
Can a California employee sue for sexual harassment after starting arbitration on other claims?
Under Ding v. Structure Therapeutics, No. 25-1532 (9th Cir. Aug. 19, 2026), yes, if she was unaware of the sex-based facts when she filed in arbitration. The EFAA election happens only when the employee first alleges a sexual harassment dispute. If she knew the facts earlier and chose arbitration anyway, a court can find waiver.
Does the EFAA apply to FEHA claims filed in California state court?
Yes. The statute reaches sexual harassment disputes under any federal, tribal, or state law, and California courts applied it to FEHA hostile work environment claims in Doe v. Second Street Corp. and Liu v. Miniso Depot.
If an employee adds a harassment claim, do her wage claims stay in court too?
Yes. The EFAA voids the arbitration agreement as to the whole case, so overtime, retaliation, and other claims filed with the harassment claim remain in court. The Ninth Circuit, the Sixth Circuit, and the California Court of Appeal agree, and the U.S. Supreme Court declined review in October 2025.
Are mandatory arbitration agreements still legal for California employers?
For most private employers, yes. The Ninth Circuit held in Chamber of Commerce v. Bonta that the Federal Arbitration Act preempts AB 51, Labor Code § 432.6, which is now permanently enjoined. The agreement cannot be enforced against a case that includes a sexual harassment dispute if the employee elects to litigate.
What happens if my company pays an arbitration invoice late in California?
Under Code of Civil Procedure § 1281.98, a payment more than 30 days after the due date is a material breach that lets the employee withdraw, sue in court, and recover her arbitration costs, with mandatory sanctions. After Hohenshelt v. Superior Court (Cal. 2025), a court can excuse a good-faith late payment, but willful or grossly negligent nonpayment still forfeits the forum.
Is a sexual harassment settlement tax deductible for the employer?
Not if it is subject to a nondisclosure agreement. Internal Revenue Code § 162(q) denies a deduction for any settlement or payment related to sexual harassment or sexual abuse that is subject to an NDA, and for the related attorney’s fees. Mixed-case settlements should allocate the payment among claims in writing.
How North Star Law Firm Can Help
North Star Law Firm advises Inland Empire and Sacramento-area employers on drafting and reviewing arbitration agreements that account for the EFAA and California’s fee-payment rules, and on structuring settlements so the tax result matches the business deal. Phillip Zagotti is a California attorney and a CPA, so the firm can handle the tax consequences of a harassment settlement and the contract questions in one engagement.
If a former employee has withdrawn from arbitration or a demand letter alleges harassment alongside wage claims, review the agreement and the fee-payment record before the response is due. Schedule a consultation at calendly.com/pzagotti-ca-legal/30min or through the firm’s contact page.