SpaceX Loses Bid to Force Fired Workers Into Arbitration

SpaceX has lost an appeals-court bid to move eight former employees’ workplace lawsuit into arbitration, keeping their claims in federal court after a split ruling over a law limiting forced arbitration in sexual-harassment disputes.

The U.S. Court of Appeals for the Ninth Circuit ruled 2-1 on November 10 that the former workers can invoke the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, known as the EFAA. The decision upholds a lower court’s refusal to compel arbitration.

The employees say SpaceX fired them after they helped write and circulate an open letter to management raising concerns about alleged sexual harassment and workplace conditions. Their complaint points to Elon Musk’s posts on Twitter, now X, which they allege encouraged inappropriate conduct at work.

All eight brought retaliation claims, although their other claims differ. SpaceX argued that their employment agreements required arbitration and that the allegations did not meet the legal standard needed to trigger the EFAA’s exception.

Writing for the majority, Judge Michelle Friedland rejected the company’s argument that workers first had to plead a sexual-harassment claim strong enough to survive a motion to dismiss. The court held that allegations of retaliation for opposing purported sexual harassment can qualify, and that the exception applies to the entire case.

That distinction matters: the ruling decides where the dispute can proceed. It does not establish that harassment or unlawful retaliation occurred, award damages or decide the employees’ underlying claims.

Judge Eric Tung dissented, arguing that courts should require allegations of facts that, if true, would amount to sexual harassment under the applicable law. He would have sent the arbitration question back to the district court under that standard.

The majority’s opinion leaves SpaceX facing the employees’ case in court rather than separating out claims for arbitration. The company can still contest the allegations as the litigation continues.

The legal setback comes as SpaceX expands its manufacturing plans, including a new solar-cell equipment deal for its planned Starmind AI satellites.

Should workplace retaliation claims tied to alleged harassment be heard in court even when employees signed arbitration agreements?