In Equal Employment Opportunity Commission v Waffle House, Inc(1) the Supreme Court recently tackled the issue of whether there is any limitation on remedies available to the Equal Employment Opportunity Commission where an employee executes an arbitration agreement with the employer and the commission commences a lawsuit in its own name. The court ruled that the commission was not barred from pursuing victim-specific judicial relief (eg, backpay, reinstatement and damages) on behalf of an employee who had signed an arbitration agreement with his former employer. The Supreme Court thus reversed a decision of the Fourth Circuit Court of Appeals (and overruled prior decisions of other courts) that the commission could seek injunctive relief but could not pursue the employee's individual remedies. In so ruling, the Supreme Court relied upon the commission's statutory function in vindicating the public interest pursuant to the detailed enforcement scheme underlying Title 7 Civil Rights Act 1964 and the Americans with Disabilities Act 1990.
The Waffle House decision adversely affects an employer that has arbitration agreements with its employees and is sued by the Equal Employment Opportunity Commission. However, certain factors reduce the potential significance of the case. First, as the Supreme Court noted in Waffle House, the commission files very few actions as compared to the number of charges filed by employees each year. The court cited statistics from fiscal year 2000 that the commission received almost 80,000 charges, found reasonable cause to believe discrimination had occurred with respect to 8,248 of these charges, yet only filed 291 lawsuits and intervened in 111 others. In addition, despite the fact that the commission is a governmental agency, its attempts to pursue (or refusal to withdraw) frivolous claims against employers may subject the commission to sanctions, including attorneys fees; for instance, a federal court recently awarded attorneys fees to an employer that had been the subject of a baseless action maintained by the Equal Employment Opportunity Commission under the Americans with Disabilities Act.(2)
Second, the Supreme Court noted (without deciding) that principles of res judicata (ie, a final and binding issue has been issued on the matter), mootness and mitigation could limit the relief that the commission might actually obtain in court. The court recognized that "if, for example, [the employee] had failed to mitigate his damages, or had accepted a monetary settlement, any recovery by the [commission] would be limited accordingly".
Thus, an employer that seeks to require its employees to arbitrate claims against it, and that drafts an otherwise enforceable agreement, will continue to realize the benefits of its bargain after Waffle House in all but the rarest of circumstances.
For further information on this topic please contact Kevin B Leblang or Robert N Holtzman at Kramer Levin Naftalis & Frankel LLP by telephone (+1 212 715 9100) or by fax (+1 212 715 8000) or by email ([email protected] or [email protected]).
(2) Equal Employment Opportunity Commission v JB Hunt Transp, Inc, 2001 WL 1217201 (NDNY September 27 2001).