CVS Arbitration Appeal Probes Scope of Sexual Harassment Opt-Out

A CVS store manager bidding to keep her lawsuit in court will urge the Third Circuit during oral argument on Wednesday to clarify what constitutes a sexual harassment dispute under a new exception to arbitration opt-outs.

A ruling by the Philadelphia-based appeals court in Michele Cornelius’s case will play a role in determining whether the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act has the effect Congress intended, attorneys unaffiliated with the case say. Others say companies will face additional litigation costs, risk out-sized damages awards, and may be more inclined to settle if allegations like Cornelius’, which don’t assert any sexual misconduct, are exempted from arbitration.

The 2022 law allows workers to avoid arbitration if they raise a dispute that relates to sexual harassment or sexual assault, but a New Jersey federal judge required Cornelius to arbitrate her lawsuit against CVS Pharmacy Inc., New Jersey CVS Pharmacy LLC, and Shardul Patel, her supervisor and alleged harasser. Cornelius’ suit describes gender discrimination and didn’t allege a “sexual harassment dispute” under the EFAA, Judge Susan D. Wigenton ruled.

“Congress intended to pull in a wide range of claims” when it passed the EFAA and the district court “really whiffed” the analysis by not recognizing Cornelius alleged sexual harassment by asserting Patel subjected her to pervasive intentional sex-based discrimination, Rachel Smith of the National Women’s Law Center said. Harassment is a type of discrimination, and a hostile work environment based on sex doesn’t need to involve sexual advances or sexual desire, Smith said.

The Equal Employment Opportunity Commission and Public Justice back Cornelius in that view. The EEOC will be participating in the oral argument before the US Court of Appeals for the Third Circuit.

Conflating Claims

The argument advanced by Cornelius and the EEOC conflates two distinct claims, Anthony J. Oncidi of Proskauer Rose LLP said.

There’s a well-defined distinction under Title VII of the 1964 Civil Rights Act between sex discrimination claims and sexual harassment claims. That was universally understood prior to the EFAA, but now “suddenly we’re seeing sex discrimination claims masquerading as sexual harassment claims simply to avoid arbitration,” he said.

Smith and Deborah Widiss of the University of Indiana Maurer School of Law disagree. The Supreme Court has held that sexual harassment is sex discrimination under Title VII, they said.

Federal courts have also made clear that judges should look at the totality of what happened to determine whether sexual harassment occurred, Widiss said. Hostile environment claims often include lots of behavior that isn’t sexual in nature, she said.

According to Cornelius, Patel’s repeated abuse included disrespecting her work-related concerns and family-care needs, sending rude and unnecessary text messages after hours, and intentionally overworking her. He denied her promotions and raises and generally favored male employees, Cornelius says.

Abuse like that is harassment under Title VII—and thus the EFAA—if it’s linked to sex, Widiss said.

Line May Be Needed

CVS disputes the notion that the district court took too narrow a view of what constitutes sexual harassment when it found Cornelius pleaded only gender discrimination. The company has the backing of the Retail Litigation Center and US Chamber of Commerce. They say the EFAA was only meant to apply to claims arising out of sexual misconduct and will also be participating in the oral argument.

That could raise the question of whether there’s a difference between a sexually hostile environment and one based on sex. The EEOC says in another case pending before the Third Circuit involving an LGBTQ+ employee that sex-based hostile environment allegations can be sexual harassment under Title VII and the EFAA.

Any distinction may not have mattered up until now, but it could be that the Third Circuit will need to draw a line, Michael Eastman of the Center for Workplace Compliance said. Cornelius’ allegations look like a garden-variety sex discrimination case, he said.

Leah M. Stiegler of Woods Rogers Vandeventer Black PLC said whether the absence of asserted sexual behavior provides grounds for a distinction may depend on what approach the Third Circuit takes. If it focuses on the text of the law, Cornelius and her backers “have a decent argument,” she said.

The EFAA, however, was passed after the #MeToo movement, so the context was sexual assault or behavior, Stiegler said. That shows a legislative intent supporting CVS’s view, Stiegler said.

Requiring sexual attraction or desire to trigger the EFAA would be absurd, because even sexual assault can be motivated by something other than sexual desire, Shane Seppinni of Seppinni Law PLLC said. It’s insulting to women that they’re supposedly not allowed their day in court because their harasser wasn’t sexually attracted to them, he said.

Judges Michael A. Chagares, David J. Porter, and Cindy K. Chung will hear the appeal.

Alex G. Leone of Maplewood, N.J., represents Cornelius. Littler Mendelson PC represents the defendants.

The case is Cornelius v. CVS Pharmacy, Inc., 3d Cir., No. 23-02961, oral argument 10/30/24.