Holland-Thielen v. SpaceX: Fired for a Sexual-Harassment Complaint, Employees Can Avoid Arbitration Under the EFAA

You signed an arbitration agreement when you were hired, complained that conduct at work was sexual harassment, and were fired. Under Holland-Thielen v. SpaceX, No. 25-4811 (9th Cir. Nov. 10, 2026), the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA) lets you keep your whole case in court if your complaint asserts that the conduct was sexual harassment under applicable law and at least one claim, such as retaliation, rests on that dispute. You do not have to show first that the harassment claim would survive a motion to dismiss, but the employer can still bring that motion, and arbitration can return only if every claim premised on the harassment dispute, retaliation included, is dismissed.

The divided panel affirmed the denial of SpaceX’s motion to compel arbitration; Judge Friedland wrote for the majority and Judge Tung dissented. The published opinion binds federal courts in the Ninth Circuit, including the federal district courts in California; California state courts, which also apply the EFAA, are not bound by this decision.

An open letter about Musk’s posts, and eight firings

The eight former employees allege that sexual banter and harassment were commonplace at SpaceX and that Elon Musk encouraged them through sexually explicit posts on Twitter (now X). The posts, they allege, were widely shared and “permeated” the workplace.

The employees wrote management an “Open Letter” about the work environment, asserting that Musk’s posts were “sexual harassment.” The day after it circulated, SpaceX fired four employees identified as authors, giving as its reason their role in “conceiving, writing, and distributing the Open Letter.” The other four admitted helping draft it during an HR investigation and were fired soon after.

They sued in state court under California law for hostile-environment harassment, coworker harassment, failure to prevent, gender discrimination and retaliatory termination. Retaliation was the only claim all eight brought. SpaceX answered, removed the case to federal court and moved to compel arbitration under the employees’ signed agreements.

SpaceX argued the harassment claim had to survive a motion to dismiss

The EFAA, 9 U.S.C. §§ 401–402, makes a predispute arbitration agreement unenforceable, at the election of the person alleging the conduct, for a case that “relates to” a sexual harassment dispute. Section 401(4) defines that dispute as “a dispute relating to conduct that is alleged to constitute sexual harassment under applicable Federal, Tribal, or State law”. Under the court’s earlier decision in Ding v. Structure Therapeutics, the exemption covers the “entire case,” not only the harassment claims.

SpaceX argued that “alleged” means adequately alleged: the complaint must state a harassment claim that would survive a motion to dismiss. Because Musk’s posts were not severe or pervasive, it contended, the employees could not “bootstrap” their way out of arbitration through retaliation claims.

The majority: “alleged” means asserted

Drawing on ordinary and legal dictionaries, the majority read the phrase to mean “conduct that is asserted to amount to sexual harassment.” Courts therefore ask “whether the plaintiff’s complaint describes conduct asserted to be a basis for a sexual harassment claim”.

The statute says nothing about the federal pleading standard, and when Congress wants that standard it has typically said so expressly. The “under applicable law” clause only requires a claimed violation of a relevant body of law, not, say, foreign law.

For a mislabeled claim, the majority said, the answer is a motion to dismiss, often with leave to amend, and Rule 11. An order compelling arbitration, by contrast, cannot be immediately appealed and usually ends the plaintiff’s time in court. Because the statute uses the present tense “relates to,” the EFAA applies “only so long as a sexual harassment dispute is part of the case.” Moving to dismiss first does not waive arbitration, because no right to compel it exists until every claim premised on a sexual harassment dispute is gone; the employer can then seek arbitration of what remains.

Retaliation for opposing harassment is a sexual harassment dispute

The employees alleged that Musk “engaged in sexually harassing conduct and creat[ed] a hostile work environment” in violation of California law, and that SpaceX fired them for opposing it. A dispute over retaliation for opposing alleged harassment is “directly connected” to the alleged harassment, so it is a sexual harassment dispute. A footnote left open whether § 402(a)’s phrase “alleging conduct constituting a sexual harassment dispute” imposes the pleading standard; the retaliation allegations met it anyway.

The relatedness test has a floor: a “cursory or peripheral reference” is not enough; the plaintiff “must assert at least one claim premised on a ‘sexual harassment dispute.’” Each employee’s retaliation claim met that bar and carried the entire case. The court left open whether the other claims qualify, how the statute applies when some joint plaintiffs lack such a claim, and SpaceX’s timeliness objection to one coworker-harassment claim.

The dissent: “allege” means state facts that add up to harassment

Judge Tung opened with an employee fired over a cafeteria dispute who calls it sexual harassment. Courts, he wrote, accept pleaded facts as true but not a party’s legal conclusions, and here “allege” means to state facts that, if true, prove a legal claim. He relied on § 402(a)’s “conduct constituting,” § 402(b)’s assignment of the question to a court, and the common-law demurrer rule.

He warned that a plaintiff now need only say “the magic words,” that Rule 11 is a weak backstop, and that employers who first move to dismiss risk waiving arbitration. To the majority’s amendment and appeal concerns, he answered that plaintiffs can amend once a motion to compel is filed and that the lack of an immediate appeal from an order compelling arbitration is Congress’s choice. He would have vacated and remanded for the district court, which had found a “nonfrivolous” harassment allegation, to apply his standard.

What the ruling means if you signed an arbitration agreement

The EFAA reaches only sexual harassment and sexual assault disputes, and it applies to disputes or claims that arose or accrued on or after March 3, 2022. It is your election, so you may still choose arbitration. In our reading, the complaint carries the weight: it should identify the conduct, say why it is sexual harassment under the law invoked, and connect any firing to your opposition. Expect a motion to dismiss; the arbitration agreement can return for what remains only if every claim premised on the harassment dispute, retaliation included, falls. Our guide to severe or pervasive harassment in California explains the records that support those allegations.