Supreme Court Clarifies EEOC's Role in Arbitration Disputes
February 2002
The Court has upheld the EEOC's right to seek
all available remedies for job discrimination regardless of existing arbitration
agreements. Paul Siegel examines the ramifications.
by Paul
J. Siegel, Esq.
Jackson, Lewis,
Schnitzler & Krupman
In its second decision in 10 months recognizing the enforceability of private
arbitration agreements, the U. S. Supreme Court, in EEOC v Waffle House, Inc., has clarified the role of the Equal Employment
Opportunity Commission (EEPC) in litigating discrimination complaints subject
to an arbitration agreement. On January 15, the Court issued its decision upholding
the EEOC's right to seek all available remedies for job discrimination regardless
of the employer-employee agreement to resolve their disputes through binding
arbitration.
Rejecting any limitation on the Commission's right to enforce federal anti-discrimination
laws, the Court held:
There is no language in the statute or ... cases suggesting that the
existence of an arbitration agreement between private parties materially
changes the EEOC's statutory function or the remedies that are otherwise
available.
Jackson Lewis represented the employer in the litigation. Partner David Gordon,
who argued the case before the Court, commented,
We're disappointed in the Court's ruling, but we don't believe employers
should be discouraged from implementing or maintaining arbitration systems
as a result of this decision. The Court's decision did nothing to call into
question the viability and enforceability of a fair and reasonable mandatory
arbitration procedure for resolving workplace disputes outside the courtroom.
Indeed, while reaffirming the EEOC's independent right to seek remedies for
job discrimination, the Supreme Court acknowledged the longstanding federal
policy favoring arbitration agreements—most recently recognized in its March
2001 decision in Circuit City Stores, Inc. v Adams.
In Circuit City, the Court unequivocally stated
that employment contracts, including private agreements to arbitrate employment
disputes, fall within the Federal Arbitration Act.
In reaching its decision in Waffle House,
the Supreme Court compared the scope of the EEOC's enforcement authority with
the FAA's guarantee of enforceability of private agreements to arbitrate. Since
the EEOC itself was not a party to the arbitration agreement between the company
and the individual, the Court found the agency could pursue statutory remedies
for the alleged discrimination, including the "victim-specific" relief of reinstatement,
backpay, compensatory, and punitive damages. Once a charge is filed, the Court
noted, the EEOC becomes "the master of its own case...." and is not a mere surrogate
for the aggrieved worker.
Rare Filing of Lawsuit by Agency
The situation the Supreme Court considered in the Waffle House case was unusual. As the Supreme Court noted in its opinion,
the EEOC files suit in less than 1 percent of all charges that come before it
each year. In fact, in fiscal year 2000, the Commission filed fewer than 300
lawsuits, representing less than 5 percent of all cases in which the agency
itself found reasonable cause to believe discrimination occurred. In contrast,
alleged victims of employment discrimination filed more than 21,000 lawsuits
in the federal courts in 2000.
Thus, it was a rare occurrence that the EEOC subsequently filed the lawsuit
independently of the employee, alleging the company's employment practices,
including the discharge, violated the Americans With Disabilities Act (ADA).
Although the employee had agreed to resolve any disputes with his employer through
arbitration, instead he had gone directly to the EEOC with his complaint.
In the lawsuit, the agency sought injunctive relief to eradicate the effects
of the alleged unlawful practices, as well as specific relief designed to make
the employee whole. Rather than dismiss the case because of the binding arbitration
agreement between the parties, the EEOC had authority to exercise its enforcement
powers, including seeking monetary and other remedies that are specific to the
individual employee, the Supreme Court found.
Where Does Arbitration of Employment Disputes Stand Now?
Many employers may be wondering whether this Supreme Court decision limits
the enforceability or desirability of private agreements to arbitrate employment
disputes. The first place to look for an answer to those questions is the language
of the decision itself, where the Court commented that the EEOC's ability to
seek relief in cases where an employee has agreed to binding arbitration, but
has not yet invoked the procedure, "will have a negligible effect on the federal
policy favoring arbitration."
The Court went on to say that given the EEOC's restrained litigation practice
over the past 20 years, concerns that this decision will discourage use of arbitration
agreements are "highly implausible." "When speculating about the impact this
decision might have on the behavior of employees and employers, we think it
is worth recognizing that the EEOC files suit in less than 1 percent of the
charges filed each year," the Court noted.
The reasons employers have turned to the private arbitration of employment
disputes have not disappeared. In the past decade, the tremendous increase in
employee lawsuits, the ability of plaintiffs to recover virtually unlimited
damage awards, and the unpredictability of juries have combined to make employment
litigation even more treacherous and costly for employers. Arbitration offers
a change of forum, while still assuring the parties the same rights and remedies
as a court or fair employment practice agency.
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