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EEOC can pursue damages even if employees agree to arbitration
On January 15, 2002, in a 6 to 3 decision, the U.S. Supreme Court held that an agreement between an employer and an employee to arbitrate employment-related disputes does not bar the EEOC from pursuing victim-specific judicial relief, such as backpay, reinstatement, and damages, in an ADA enforcement action. See EEOC v. Waffle House, Inc., No. 99-1823 (2002) at FindLaw for Legal Professionals. The plaintiff in the case, Eric Baker, had signed a mandatory arbitration agreement in his application for employment with Waffle House. Sixteen days into his employment, Baker had a seizure at work and was discharged shortly thereafter. However, rather than honor the terms of his arbitration agreement, he elected to file a timely charge of discrimination with the EEOC.
In its decision, the Court reasoned that, however preferable arbitration may be as a dispute-resolution mechanism, the Federal Arbitration Act did not preempt the EEOC's authority to pursue damages in the face of a valid arbitration agreement. Accordingly, even if an employee agrees to arbitration as the exclusive means to resolving disputes, he or she may file a charge with the EEOC and the EEOC may pursue damages on the employees behalf. In other words, employees, at least in theory, now have two bites at the apple.
In practice, both the EEOC and the Maine Human Rights Commission bring relatively few enforcementactions. Not counting those lawsuits already commenced, in Fiscal Year 2000, the EEOC filed 327 direct suits. By contrast, the EEOC received over 15,000 charges in the same period. At this point, it is unclear whether the EEOC will decide to press more of these cases. Nonetheless, its ability to do so is now clear, as valid arbitration agreements are not impediments to EEOC's pursuit of damages.
What does this mean for employers? In considering whether to use arbitration clauses in employment agreements and releases, employers must now keep in mind the potential for the EEOC to file suit on its own. [1] The Courts decision may embolden employees to break the terms of an arbitration agreement and file charges. For highly compensated employees, an appropriate liquidated damages clause may dissuade them from breaching the arbitration agreement and filing a charge. However, it is unclear whether such a clause would be upheld in court; which is where an employer would probably find itself trying to enforce it.
Rev'd 3.5.'02
[1]Waffle House is somewhat unique in that the arbitration agreement which Baker signed appeared in an application for employment as opposed to a more formal employment agreement. Given the nature of the positions, this is not surprising. Nonetheless, the document in which the arbitration clause appeared was not central to the Courts ruling.
Please contact Matthew S. Raynes, mraynes@eatonpeabody.com, for further information.
This paper is provided as general information, and is not a substitute for legal or other professional advice.
On January 15, 2002, in a 6 to 3 decision, the U.S. Supreme Court held that an agreement between an employer and an employee to arbitrate employment-related disputes does not bar the EEOC from pursuing victim-specific judicial relief, such as backpay, reinstatement, and damages, in an ADA enforcement action. See EEOC v. Waffle House, Inc., No. 99-1823 (2002) at FindLaw for Legal Professionals. The plaintiff in the case, Eric Baker, had signed a mandatory arbitration agreement in his application for employment with Waffle House. Sixteen days into his employment, Baker had a seizure at work and was discharged shortly thereafter. However, rather than honor the terms of his arbitration agreement, he elected to file a timely charge of discrimination with the EEOC.
In its decision, the Court reasoned that, however preferable arbitration may be as a dispute-resolution mechanism, the Federal Arbitration Act did not preempt the EEOC's authority to pursue damages in the face of a valid arbitration agreement. Accordingly, even if an employee agrees to arbitration as the exclusive means to resolving disputes, he or she may file a charge with the EEOC and the EEOC may pursue damages on the employees behalf. In other words, employees, at least in theory, now have two bites at the apple.
In practice, both the EEOC and the Maine Human Rights Commission bring relatively few enforcementactions. Not counting those lawsuits already commenced, in Fiscal Year 2000, the EEOC filed 327 direct suits. By contrast, the EEOC received over 15,000 charges in the same period. At this point, it is unclear whether the EEOC will decide to press more of these cases. Nonetheless, its ability to do so is now clear, as valid arbitration agreements are not impediments to EEOC's pursuit of damages.
What does this mean for employers? In considering whether to use arbitration clauses in employment agreements and releases, employers must now keep in mind the potential for the EEOC to file suit on its own. [1] The Courts decision may embolden employees to break the terms of an arbitration agreement and file charges. For highly compensated employees, an appropriate liquidated damages clause may dissuade them from breaching the arbitration agreement and filing a charge. However, it is unclear whether such a clause would be upheld in court; which is where an employer would probably find itself trying to enforce it.
Rev'd 3.5.'02
[1]Waffle House is somewhat unique in that the arbitration agreement which Baker signed appeared in an application for employment as opposed to a more formal employment agreement. Given the nature of the positions, this is not surprising. Nonetheless, the document in which the arbitration clause appeared was not central to the Courts ruling.
Please contact Matthew S. Raynes, mraynes@eatonpeabody.com, for further information.
This paper is provided as general information, and is not a substitute for legal or other professional advice.
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