A Crack In The Waffle House Armor: U.S. Court Of Appeals Holds Employers Can Enforce Arbitration Agreements Against Employees Who Intervene In EEOC Enforcement Actions

June 5, 2008 — 1,150 views  

In Equal Employment Opportunity Commission v. Waffle House, Inc., 534 U.S. 279 (2002), the U.S. Supreme Court addressed the scope of remedies the EEOC can obtain in an enforcement action under Title VII or the ADA when the complaining employee has an arbitration agreement with the defendant employer. The issue before the Supreme Court was whether the arbitration agreement barred the EEOC from pursuing "victim-specific" relief for the employee (such as back pay, reinstatement, and damages) in the enforcement action, and limited it to pursuing only injunctive relief.

The Waffle House court decided this issue squarely in favor of the EEOC. The Supreme Court noted that the federal statutes at issue clearly made the EEOC the master of its own enforcement action. Where the EEOC was not a party to the arbitration agreement between the employer and employee, and it had not agreed to relinquish its statutory authority to bring an enforcement action, the Supreme Court held that the pro-arbitration policy goals of the Federal Arbitration Act (FAA) did not require the EEOC to arbitrate its claims for victim-specific relief on behalf of the employee.

In Waffle House, the Supreme Court was not presented with the procedural wrinkle of an employee bound by an arbitration agreement who is exercising his or her right under Title VII to intervene in the EEOC's enforcement action. In Equal Employment Opportunity Commission v. Woodmen of the World Life Insurance Society, 2007 WL 702758 (C.A.8 (Neb.)) ("Woodmen"), the U.S. Court of Appeals for the Eighth Circuit was called upon to decide the impact of Waffle House under this scenario. The Woodmen court held that Waffle House presented no obstacle to requiring the intervening employee to arbitrate her individual claims pursuant to her arbitration agreement with the defendant employer.

In Woodmen, the EEOC brought a Title VII enforcement action against the employer in response to an administrative complaint filed by one of its former employees (Rollins). In connection with her hiring, Ms. Rollins had entered into an agreement with the employer to arbitrate any employment-related claims. Ms. Rollins successfully moved to intervene in the EEOC's enforcement action pursuant to Title VII, and she filed a cross-claim against the employer nearly identical to the EEOC's claims. The employer moved to compel arbitration of Ms. Rollins' individual claims that she raised as an intervenor and to stay her participation in the enforcement action. Ultimately, the district court denied the employer's motion and it appealed the ruling.

On appeal, the EEOC did not oppose the employer's efforts to compel Ms. Rollins to arbitrate her claims as an intervenor - it only sought to ensure that its enforcement action would not be stayed if she was forced to arbitrate. The Eighth Circuit rejected the district court's conclusion that requiring Ms. Rollins to arbitrate would interfere with the EEOC's ability to pursue its enforcement action, holding that under Waffle House the arbitration agreement and any related proceedings had no impact on the EEOC's ability to pursue the action.

The Court of Appeals also rejected Ms. Rollins' argument that her claims were not covered by her arbitration agreement because, under Waffle House, the EEOC preempted her individual cause of action by bringing its enforcement action. The court held that although Title VII prevents an employee from bringing a separate federal cause of action while the EEOC's enforcement action is pending, the employee does not lose her substantive statutory rights - they continue to exist after the EEOC has filed suit and can be protected by exercising the right under Title VII to intervene in the enforcement action. That was the basis for Ms. Rollins' cross-claims against the employer.

The Eighth Circuit also noted the Supreme Court's observation in Waffle House that it "is an open question whether a . . . arbitration judgment would affect the validity of the EEOC's claim or the character of relief the EEOC may seek." 534 U.S. at 297. From this, the court deduced: "Had the Supreme Court intended to preclude an employee from asserting claims in arbitration against the employer concurrently with the EEOC enforcement action . . . , it would not have had occasion or need to discuss the possible ramifications of an arbitration award." 2007 WL 702758 at *6.

The Woodmen court concluded that neither Title VII nor Waffle House precluded Ms. Rollins from arbitrating all of the cross-claims she asserted as an intervenor in the EEOC's enforcement action, and that the FAA compelled her to do so. Accordingly, the Eighth Circuit reversed the district court's order denying the employer's motion to compel arbitration and directed it to stay Ms. Rollins' cross-claims.

This case demonstrates that, even after the Supreme Court's decision in Waffle House, having arbitration agreements with employees for employment-related claims can have strategic value for employers in EEOC enforcement actions. We would be pleased to discuss this issue with you further, including reviewing, updating or implementing employment arbitration agreements for your employees.