EEOC V. Waffle House: Employers Win, Again: The U.S. Supreme Court Handed Employees Who Sign Mandatory Arbitration Agreements a Hollow Victory Because the EEOC Brings So Few Cases in Court

By Burton, Chad Egan | Defense Counsel Journal, January 2004 | Go to article overview

EEOC V. Waffle House: Employers Win, Again: The U.S. Supreme Court Handed Employees Who Sign Mandatory Arbitration Agreements a Hollow Victory Because the EEOC Brings So Few Cases in Court


Burton, Chad Egan, Defense Counsel Journal


SIXTEEN days after Eric Baker began working as a Waffle House grill operator, he suffered from a seizure at work. Shortly after that, he was fired. Like all prospective Waffle House employees, he had signed a mandatory arbitration agreement as a condition of employment. It mandated that any dispute arising from his employment would be resolved through binding arbitration. Mandatory arbitration agreements have become popular tools employers use to keep disputes with employees, including Title VII claims under the Civil Rights Act of 1964, out of the courts.

In 2001 in Circuit City Stores Inc. v. Adams, (1) the U.S. Supreme Court held that the Federal Arbitration Act (FAA) precludes employees under mandatory arbitration agreements, like Baker, from bringing an individual private lawsuit against their employer. In 2002 in Equal Employment Opportunity Commission v. Waffle House, (2) the Court seemed to loosen the collar on its continued enforcement of arbitration agreements, and it held that the EEOC could file a lawsuit to recover monetary damages on behalf of these employees.

Unfortunately, the Waffle House decision may not provide the relief employees need. (3) The Court left open the question of whether a claim brought by the EEOC would be precluded if an employee previously arbitrated the claim. Whether or not the employee does so, employers are still ahead. If an employee's arbitration precludes an EEOC claim, the employer has the advantage because arbitrating employment discrimination claims favors the employer. Even if the EEOC may pursue a claim against the employer, statistics show that the likelihood of a lawsuit is very low.

ROAD TO WAFFLE HOUSE

A. In the Beginning

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on an "individual's race, color, religion, sex, or national origin." 42 U.S.C. [section] 2000e et seq. It also created the Equal Employment Opportunity Commission. The commission originally did not have the power to file suit against employers, but in 1972 Congress amended the act to give the EEOC to bring its own enforcement actions in federal court--declaratory relief, injunctions, and back pay for victims. The Civil Rights Act of 1991 again amended Title VII to allow the "complaining party," a term that includes private plaintiffs and the EEOC, to recover reinstatement of employees, as well as compensatory and punitive damages for unlawful discriminatory acts. 42 U.S.C. [section] 1981. The 1991 amendments also applied to claims under the American with Disabilities Act, which was involved in Waffle House.

When it enacted the 1991 amendments, Congress supported the use of arbitration, stating that "[w]here appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including ... arbitration, is encouraged to resolve disputes arising under the acts." This provision has lead courts to determine whether mandatory binding arbitration clauses, which can force employees to waive their statutory rights to bring federal discrimination claims, are legal and enforceable. (4)

The Federal Arbitration Act (FAA), 9 U.S.C. [section] 1 et seq., enacted in 1925, mandates judicial enforcement of all written arbitration agreements, including any "maritime transaction or a contract evidencing a transaction involving commerce." Section 1 of the act expressly states that it does not apply to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." The drafting history of the FAA indicates that it was intended to enforce commercial arbitrations and that it was not meant to apply to employment contracts. Despite these historical indications, the U.S. Supreme Court has ultimately construed the act to include almost all employment arbitration agreements?

B. Along the Way

Three cases explain how the Supreme Court has enforced mandatory arbitration agreements and expanded the FAA beyond its original purpose.

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