Supreme Court Permits EEOC to Pursue Relief Even When Employee Agrees to Arbitrate Claims

Date: August 6, 2002

By: Kevin C. McCormick, Esq.

In a decision issued on January 15, 2002, the United States Supreme Court decided the hotly contested issue of whether an agreement between an employer and an employee to arbitrate employment-related disputes, bars the Equal Employment Opportunity Commission (“EEOC”) from pursuing victim-specific judicial relief, such as back pay, reinstatement, and damages, in an enforcement action alleging that the employer violated the Americans With Disabilities Act (“ADA”).

In EEOC v. Waffle House, the Court answered that question in the negative. The decision is a major disappointment for employers, many of whom find arbitration as a cheaper, faster, and more practical method of resolving employment disputes as compared to long, drawn out and expensive court litigation.

In Waffle House, the employee, Eric Baker, signed a binding-arbitration agreement when he went to work for Waffle House, Inc., restaurant in Columbia, South Carolina. Less than a month after he was hired, Baker suffered a seizure at work and was fired shortly thereafter. He filed a complaint with the EEOC, claiming a violation of the ADA. After an investigation and an attempt to conciliate, the EEOC filed an enforcement action against Waffle House in the U.S. District Court seeking injunctive relief, as well as reimbursement, back pay and compensatory and punitive damages on behalf of Baker. Waffle House countered by moving to stay the EEOC enforcement action and compel arbitration of Baker's claims, per the employment agreement. Although the District Court denied the employer's motion, the U.S. Court of Appeals for the Fourth Circuit reversed and found the arbitration agreement valid and enforceable.

In its recent decision, the Supreme Court overturned that decision. According to the Court, once a discrimination charge is filed with the EEOC, the EEOC is the master of its own case, with the authority to evaluate the strength of the public interest at stake and to determine whether public resources should be committed to the recovery of victim-specific relief. Because the EEOC was not a party to the arbitration agreement between Baker and his employer, and did not agree to arbitrate its claims, the Court reasoned that the Federal Arbitration Act's pro-arbitration policy goals do not require the EEOC to relinquish its statutory authority to pursue victim-specific relief, regardless of the forum selected by the parties to resolve their disputes. Justice Clarence Thomas, a former EEOC Chairman, along with Justices Rehnquist and Scalia, dissented stating that in their opinion, the EEOC should not be able to do on behalf of an employee “that which an employee has agreed not to do for himself.”

It is too early to assess the impact of this decision on employers who regularly use arbitration agreements with their employees. By its terms, the decision demonstrates that even when the arbitration proceeding is concluded, the dispute may not be finally over, as the EEOC has the right to, in effect, re-litigate the very issues decided in the arbitration. However, as recognized in the decision, due to a heavy case load and limited resources, the EEOC actually sues in only a small number of the charges it receives. Whether that past practice continues, remains to be seen.