The U.S. Supreme Court has handed down a ruling that permits the federal Equal Employment Opportunity Commission to sue you for job discrimination, even if the employee has signed a mandatory arbitration agreement. We’ll explain this new ruling and its impact.
Employee Fired After Seizure
When Eric Baker was hired as a grill operator at a Waffle House restaurant in South Carolina, he was required to sign a job application containing a mandatory arbitration agreement. The arbitration provision stated that any dispute or claim concerning Baker’s employment would be settled by binding arbitration.
Sixteen days later, Baker suffered a seizure at work. Soon after, he was fired. Baker never initiated arbitration proceedings. Instead, he filed a charge of discrimination with the EEOC, claiming that his termination violated the federal Americans with Disabilities Act.
EEOC Goes After Employer In Court
The EEOC sued Waffle House on Baker’s behalf, although he wasn’t a party to the lawsuit. The agency asked the court for Baker’s reinstatement and damages—including back pay, pain and suffering and punitive damages. Waffle House asked the court to dismiss the lawsuit and send it to an arbitrator because Baker had signed an arbitration agreement.
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Court Says EEOC Can Sue
Now the U.S. Supreme Court has given the EEOC the green light to pursue its lawsuit against Waffle House. The court said that federal anti-discrimination laws give the EEOC the power to sue an employer for illegal discrimination and pursue reinstatement and damages for the employee. And nothing in these anti-bias statutes suggests that the EEOC’s enforcement powers are limited because the employer and employee have entered into a private arbitration agreement. According to the court, the agency can’t be bound by an agreement it didn’t sign. Thus, if the EEOC decides to file an enforcement lawsuit against an employer, a private arbitration agreement signed by the employer and employee will not restrict the EEOC’s action.
Practical Impact
Less than a year ago, the Supreme Court issued a ruling that endorsed mandatory arbitration of employment disputes—and now the new ruling appears to have dealt mandatory arbitration a setback. But the Waffle House case probably won’t have a drastic impact. That’s because, due to limited resources, the EEOC only manages to file a couple hundred lawsuits a year out of the 80,000 charges of employment discrimination it receives annually.
There is still some risk that you could be hit with an EEOC lawsuit after you have already participated in arbitration proceedings with the employee. But, the court pointed out, the EEOC’s recovery of damages will be reduced by any damages the employee collects in a private settlement with you or an arbitrator’s award. Plus, the court stressed that the EEOC can’t recover damages an employee hasn’t mitigated, such as if the employee failed to look for a new job.