April 14, 2025|Franchise Frontlines
April 14, 2025 | Tennessee Court of Appeals | Published Decision
Executive Summary
In Ruiz v. Butts Foods, L.P., 2025 WL 1099966 (Tenn. Ct. App. Apr. 14, 2025), the Tennessee Court of Appeals affirmed a trial court’s refusal to compel arbitration based on the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA). The court held that a hostile-work-environment claim accruing through ongoing conduct after March 3, 2022 falls within the EFAA’s scope, even when initial conduct predates its effective date. It further concluded that once a plaintiff elects the EFAA, the statute invalidates arbitration for the entire case, not just the harassment-based claims. The ruling aligns Tennessee with the strong national majority interpreting the EFAA broadly and underscores critical implications for employers—particularly national brands and multi-unit operators—whose arbitration agreements were drafted before the 2022 statute.
Relevant Background
The allegations involved an employee who began working for two affiliated employers in January 2022. According to the complaint, the employee experienced sexually harassing behavior within weeks of hire, and this conduct worsened over time. The complaint alleged comments and behavior by a manager, lack of initial remedial action, and continuing interactions that contributed to what was described as a hostile work environment. It was further alleged that the employee reported the conduct in April 2022, well after the March 3, 2022 effective date of the EFAA, and again in August 2022, asserting that retaliation occurred thereafter.
In September 2022, the employee filed suit in chancery court. The complaint asserted a hostile-work-environment sexual harassment claim under the Tennessee Human Rights Act, as well as retaliation and several related tort theories, including negligent supervision, negligent retention, negligent infliction of emotional distress, gross negligence, and battery. The complaint also alleged that the two companies acted as joint employers.
The employers moved to compel arbitration based on an agreement executed as a condition of employment. They argued that the Federal Arbitration Act (FAA) controlled and that the EFAA did not apply because, in their view, the hostile-work-environment claim “arose” before the EFAA’s effective date. They contended that because the employee alleged harassment beginning in January or February 2022, the “dispute” existed prior to March 3, 2022, rendering the EFAA inapplicable.
The employee opposed the motion and invoked the EFAA’s language allowing a claimant alleging a sexual harassment dispute to elect to invalidate any pre-dispute arbitration clause. The employee argued that hostile-work-environment claims accrue only once the conduct becomes severe or pervasive, and that the workplace was not alleged to have reached that threshold until April 2022—after the effective date. The employee also argued that the alleged harassment continued and intensified after March 3. The employee further asserted that the EFAA applies to “a case” filed under state or federal law that relates to sexual harassment, meaning the entire action should proceed in court.
The trial court denied the motion to compel arbitration, finding that the employee alleged a continuing violation that crossed March 3 and that the statutory definition of a sexual harassment dispute was satisfied. The trial court also held that under § 402(a), the EFAA’s invalidation applies to the entire case, not just specific claims. The employers appealed.
Decision
The Tennessee Court of Appeals affirmed, resolving two issues of significant importance for employers.
First, the court held that the sexual harassment hostile-work-environment claim “arose or accrued” after March 3, 2022, bringing the dispute squarely within the EFAA. Relying on extensive federal authority—including the Second Circuit’s reasoning in Olivieri v. Stifel, Nicolaus & Co., 112 F.4th 74 (2d Cir. 2024)—the court adopted the continuing-violation doctrine as the proper lens for assessing accrual under the EFAA. Hostile work environments, the court explained, are “single and indivisible” claims composed of repetitive acts that may “accrue and reaccrue” with each new incident. Because the complaint alleged multiple acts after March 3, 2022 and asserted that the environment did not become actionable until April 2022, the claim accrued after the Act’s effective date.
The court expressly rejected the argument that accrual occurs with the first harassing incident, noting that this position is inconsistent with the longstanding structure of hostile-work-environment claims as well as the weight of post-EFAA precedent. It further rejected the claim that applying the EFAA where conduct straddles March 3 would be impermissibly retroactive, explaining that the statute applies prospectively to post-enactment conduct that is part of the same continuing course.
Second, the court agreed with the growing national majority in holding that once the EFAA is triggered, it invalidates arbitration for the entire case. The court surveyed decisions across multiple jurisdictions—federal district courts, state appellate courts, and treatises—and concluded that “case,” as used in 9 U.S.C. § 402(a), means the whole action, not isolated claims. Because the statute directs that no predispute arbitration agreement is enforceable “with respect to a case” relating to a sexual harassment dispute, severance of individual counts is not permitted. The court found this interpretation consistent with Congress’s choice to amend the FAA directly and its intent to override the FAA’s background presumption favoring arbitration in mixed-claim cases.
The court also observed that even under the minority view—requiring claim-by-claim analysis—the outcome would be the same here, because all of the asserted claims were intertwined with the sexual harassment allegations. On either approach, arbitration could not be compelled.
Looking Forward
The decision highlights several critical considerations for franchisors, multi-unit operators, and corporate affiliates that rely on arbitration programs as part of an overall risk-management strategy. The expanding national consensus treating hostile-work-environment claims as continuing violations introduces substantial uncertainty for employers seeking to enforce pre-2022 arbitration agreements. Under this approach, even a single act occurring after March 3, 2022—which may be difficult to prevent entirely in a decentralized or multi-location environment—can render an entire arbitration agreement unenforceable. Likewise, the court’s adoption of the majority rule regarding case-wide invalidation underscores that once a qualifying sexual harassment dispute is alleged, none of the claims in the action, even those unrelated to harassment, can be forced into arbitration. For franchisors and large employers, this is particularly important because harassment allegations often accompany other employment claims, magnifying discovery burdens and litigation exposure. Finally, the decision illustrates the need for employers to review and update arbitration agreements to address post-dispute elections, non-pre-dispute mechanisms, and compliance models that reflect the EFAA’s limitations. Companies that operate through multi-unit or franchise structures may benefit from revisiting internal reporting protocols, manager training, and HR escalation procedures to reduce the likelihood that conduct after March 3, 2022 will inadvertently trigger the Act’s sweeping protections. Viewed together, these developments reflect a broader shift in national policy and judicial interpretation that employers should assess proactively.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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