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Court Recognizes An Exception To Arbitration Agreements
(RIVERWOODS, ILL., January 17, 2002) If you have a beef with your boss, a
government agency can go to court on your behalf, even if youve signed away your
right to sue, according to CCH INCORPORATED (CCH), a leading provider of employment law
and human resources information and software.
By a 6-3 majority, the Supreme Court decided on January 15 that the Equal Employment
Opportunity Commission (EEOC) was within its rights to sue Waffle House, Inc., in the case
of a fired grill operator who had signed an agreement to settle all employment claims
through arbitration, rather than through the courts. The EEOC wasnt a party to the
arbitration agreement, the Court reasoned, and although it was seeking remedies such as
back pay and damages for the former employee, it "does not stand in the
The decision opens a potential "back door" for employees who sign arbitration
agreements with their employers, said James Taylor, an employment law analyst with CCH.
"Only last March, the Court closed the door on attempts by employees to avoid
mandatory arbitration of employment disputes, holding that a possible exemption from
arbitration for employment contracts found in a 1925 federal law, the Federal
Arbitration Act, was limited to contracts of transportation workers," Taylor observed
In that case, the Court ruled in a 5-4 decision that a gay former employee who alleged
discrimination by his employer was required to arbitrate his claim under an arbitration
agreement the employee signed as a condition of being hired.
"Here, Justice Stevens, writing for the majority, found that there was nothing in
the Federal Arbitration Act that authorizes a court to compel arbitration on anyone, such
as a public agency, who was not a party to an employment agreement," Taylor noted.
Arbitration agreements prevent employees from taking their employment disputes to
either federal or state courts and instead require employees to utilize alternative
dispute resolution procedures, such as arbitration, specified by their employers.
Arbitration a Trend
"There has been a trend toward writing mandatory arbitration into individual
employment contracts and employee handbooks because it allows companies to avoid costly
court cases and the uncertainty of jury awards. Arbitration is usually a quick process,
and its also private," Taylor added.
Unlike court proceedings, the findings of an arbitrator are not normally a matter of
In the latest case, the former Waffle House employee did not submit to arbitration, as
mandated by an agreement he signed before being hired, nor did he take his employer to
court. Instead, he lodged a discrimination complaint based on disability directly with the
EEOC. Although the EEOC sought relief that would directly benefit the employee, it was
acting on its own behalf, the Court found.
"The reasoning the Court used in this case would seem to apply in the case of
other government agencies with a statutory mandate to address other violations of
employment law, such as the Fair Labor Standards Act," Taylor observed.
Writing in dissent, Justice Clarence Thomas argued that the EEOC could not seek
"victim-specific" relief, such as back pay, in court when the victim could not
seek that relief on his own because of an arbitration agreement.
He also observed that the majority opinion "has no logical or principled stopping
point," and could arguably allow agencies like the EEOC to step in even when an
employee submits an issue to arbitration and signs a settlement agreement.
"If Justice Thomas concerns are widely shared, arbitration agreements may
become much less popular with employers, since one of the attractions of arbitration is
that it is supposed to be a quick, final resolution to disputes," Taylor said.
"On the other hand, as the Court noted, the EEOC rarely takes cases to court, filing
suit in less than 1 percent of the charges filed with it each year."
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded in 1913 and has
served four generations of business professionals and their clients. The company produces
more than 700 electronic and print products for the tax, legal, securities, human
resources, health care and small business markets. CCH is a wholly owned subsidiary of
Wolters Kluwer U.S. The CCH web site can be accessed at cch.com. The CCH Human Resources Group site can be accessed at hr.cch.com.