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Employment Practices

Supreme Court Clarifies EEOC's Role in Arbitration Disputes

Paul Siegel | February 1, 2002

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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.

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 (EEOC) 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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