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A Better Partnership


Feb 2002
February 01, 2002

Supreme Court Allows EEOC to Pursue Victim-Specific Remedies Against Employer in Spite of Arbitration Agreement

The United States Supreme Court, in a 6-3 ruling, has held that an agreement between an employer and an employee to arbitrate employment-related disputes does not bar the EEOC from pursuing victim-specific judicial relief, such as back pay, reinstatement, and damages. In EEOC v. Waffle House, Inc., an employee had agreed to settle any employment-related dispute or claim against his employer, Waffle House, by binding arbitration. After he was discharged, the employee filed a charge of discrimination with the EEOC, alleging that he was discharged because of his disability, in violation of the Americans with Disabilities Act. The EEOC filed an enforcement action against Waffle House, seeking back pay, reinstatement, compensatory and punitive damages on behalf of the employee. The employee was not a party to the suit. Waffle House sought to have the EEOC's claims dismissed, arguing that the arbitration provision barred the EEOC's suit. The Fourth Circuit Court of Appeals held that the EEOC could pursue its suit but that it could not seek any "victim-specific" relief for the employee. The Supreme Court reversed, holding that an arbitration agreement between an employer and employee has no effect on the EEOC's statutory right to enforce the ADA or to seek appropriate remedies, including money damages.

Employers already face a difficult decision regarding whether to require employees to arbitrate employment-related disputes. The Waffle House decision just makes the waters murkier, as employers must now anticipate that an arbitration agreement will not necessarily provide the type of protection hoped for. Even more troubling, however, is the majority's statement that "It is an open question whether a settlement or arbitration judgment would affect the validity of the EEOC's claim or the character of relief the EEOC may seek." Until now, courts and even the EEOC had agreed that once an employee settles a discrimination claim, the EEOC could not seek money damages against the employer for the same claim. The Supreme Court has now cast doubt on this, placing a shroud of uncertainty on employers any time they settle a discrimination claim with an employee.

For more information, contact your WN&J attorney.

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