The viability of mandatory arbitration as a condition of employment has been in a state of flux in recent years. On the one hand, legislatures in states such as New York and California have passed laws prohibiting mandatory arbitration for employment discrimination claims. On the other hand, as we previously wrote here, some federal judges have struck down state-law bans on mandatory arbitration for employees as preempted by the Federal Arbitration Act.
In something of an about-face, the U.S. Equal Employment Opportunity Commission (EEOC) recently rescinded its 1997 policy opposing mandatory arbitration for employment discrimination claims. In its press release issued December 16, 2019, the EEOC explained that judicial opinions from the U.S. Supreme Court and other federal courts no longer support the agency's disapproval of employers' mandatory arbitration programs. The EEOC did not mince words. After citing a long list of federal court opinions supporting the enforcement of mandatory arbitration for employees, the EEOC stated that its "Policy Statement on Mandatory Binding Arbitration does not reflect current law, is rescinded, and should not be relied upon by EEOC staff in investigations or litigation."
So what does this mean for employers? Employers that previously carved out employment discrimination claims from their mandatory arbitration programs may want to revisit their policies if they decide arbitration is their preferred forum. Employers should keep in mind, however, that even a strongly worded arbitration agreement may not bar an employee's participation in an EEOC proceeding. The EEOC emphasized in its press release that "the EEOC continues to be fully available to employees as an avenue to assert EEO rights and to investigate in the public interest, regardless of whether the parties have entered into an enforceable arbitration agreement" (emphasis added). Nevertheless, the EEOC's new stance on mandatory arbitration should make it easier for employers to stay a lawsuit filed by an employee who previously signed an arbitration agreement.