The Supreme Court held on 1/15/02 that an agreement between an employer and its employees requiring the arbitration of employment-related disputes does not prevent the EEOC from seeking judicial relief on behalf of an individual employee under the Americans with Disabilities Act ("ADA"). The Court noted that the ADA empowers the EEOC to exercise the same enforcement powers, seek the same remedies, and employ the same procedures as are set forth in Title VII of the Civil Rights Act of 1964. Since 1991, the EEOC has been able to pursue reinstatement, backpay, and compensatory or punitive damages on behalf of individual employees under Title VII. Accordingly, the EEOC may pursue those same remedies on behalf of individual employees under the ADA.The Court rejected the suggestion that the Federal Arbitration Act's policy favoring the arbitration agreements limits the scope of the EEOC's powers under the ADA. The Federal Arbitration Act requires the courts to treat arbitration agreements as they would other contracts, but it does not expand the reach of such agreements. Because the EEOC was not a party to the arbitration agreement between the respondent and its employees, the Court concluded that the EEOC was not bound by that agreement.
This case is of interest to any employer that has entered into arbitration agreements with its employees.
While the Court’s decision is an understandable reading of the EEOC’s power, it illustrates the conflict between that power and the Federal Arbitration Act, which was enacted to allow parties to settle disputes by themselves. It is obviously unfair for an employee to agree to arbitrate employment disputes, and then to turn around and bring in the EEOC to sue the employer.
Now that employers know what the rule is, they will be less certain that arbitration clauses will be as effective as had been hoped. Employees now have two opportunities to make a claim against an employer: if they fail to convince the EEOC to intervene on their behalf, they can still proceed with arbitration on their own. And if the EEOC intervenes, a company must face the power of the federal government.
Nevertheless, we expect that companies will continue to use arbitration extensively, in part because it is quicker and simpler for both sides, and in part because EEOC suits have traditionally represented a relatively small fraction of all employment related litigation.