Supreme Court to hear challenge to EEOC

High court will decide if arbitration agreements can bar agency lawsuits

March 27, 2001|By BLOOMBERG NEWS

WASHINGTON - The U.S. Supreme Court will decide whether to bar a federal anti-discrimination agency from suing companies for damages on behalf of employees covered by arbitration agreements.

Less than a week after concluding that companies can enforce arbitration accords signed by workers, the justices agreed yesterday to decide whether the Equal Employment Opportunity Commission is bound as well. Lower courts are split on the issue.

Companies are seeking to limit an agency that over the past decade has pressed more than 3,000 bias suits against employers, winning in excess of $500 million in damages. A ruling against the EEOC potentially would bar the type of suit that led to a $34 million sexual-harassment settlement with Mitsubishi Motors Manufacturing of America Inc. in 1999.

The Supreme Court might "eliminate the possibility of a class case for monetary damages" against employers with arbitration requirements, said Donald R. Livingston, former general counsel of the EEOC and now a lawyer with Akin, Gump, Strauss, Hauer & Feld LLP in Washington.

The 4th U.S. Circuit Court of Appeals in Richmond, Va., concluded that the EEOC can't pursue victim-specific forms of relief, including reinstatement and damages, if the employee is bound by an arbitration agreement.

The ruling would leave the agency free only to pursue a broader case against a company, such as one seeking changes in hiring or promotion policies

The decision "threatens serious harm to the EEOC's enforcement role under federal anti-discrimination statutes," the agency said in its appeal, which was filed before the Bush administration took office.

The EEOC is seeking to press a claim in behalf of Eric Scott Baker, a former West Columbia, S.C., employee of Waffle House Inc. The agency contends the company violated the Americans with Disabilities Act in 1994 when it fired Baker after he suffered a seizure while working as a grill operator.

Waffle House says the EEOC must respect an arbitration agreement Baker signed.

The EEOC's position "would allow an employee to circumvent the otherwise exclusive and binding nature of an arbitration program," said Richard Hafets, an employment lawyer in Baltimore with Piper Marbury Rudnick & Wolfe.

A Supreme Court ruling limiting the EEOC would be a significant victory for business, particularly for the securities industry, where many companies require workers to sign arbitration agreements as a condition of employment. The issue has taken on pronounced importance in recent years as more employers make similar demands of their workers.

Alleged victims of on-the-job discrimination generally must file their complaints first with the EEOC. The agency then will either sue on behalf of the workers or refuse to intervene but allow the employees to sue on their own.

The justices will hear the dispute during their 2001-2002 term, which begins in October.

The EEOC argues that it has authority from Congress to press lawsuits, regardless of any arbitration agreements between workers and employers. The agency says it goes to court seeking to vindicate public interests, not private ones.

"An agreement by a private party to submit disputes to arbitration - or to any other means of resolution - does not commit the EEOC to do the same thing," the government argued in a court filing that was submitted before the Clinton administration left office.

Waffle House said the lower court ruling "strikes an appropriate balance between the competing interests of the federal policy favoring arbitration and the EEOC's enforcement rights."

In limiting the EEOC's authority, the 4th Circuit joined the 2nd Circuit in New York, which has reached a similar conclusion. The 6th Circuit in Cincinnati has said the agency has authority to press suits despite arbitration accords.

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