THE SUPREME COURT LIMITS THE EFFECTIVENESS
OF EMPLOYMENT ARBITRATION AGREEMENTS

By Zachary B. Ward, Esq.

In Equal Employment Opportunity Commission v.Waffle House, Inc., 122 S.Ct. 754 (2002), the Supreme Court recently limited the effectiveness of arbitration agreements in the workplace. In a decision that surprised many observers, the Court held that even though an employee has entered into a mandatory arbitration agreement that would ordinarily preclude a lawsuit based on his federal employment-related claims, the Equal Employment Opportunity Commission ("EEOC") can still recover "victim-specific" remedies in an enforcement action brought on the employee's behalf.

The facts of the case involved a line cook at Waffle House who was terminated shortly after suffering a seizure at work. After his termination, the employee timely filed his EEOC charge of discrimination, alleging a violation of the Americans with Disabilities Act (ADA) by Waffle House. The EEOC investigated his allegations, attempted conciliation with Waffle House, and when conciliation failed brought an enforcement action against Waffle House on the employee's behalf. The EEOC's enforcement action sought, among other things, "victim-specific" relief such as back pay, reinstatement, and compensatory damages. Waffle House argued that the employee's arbitration agreement precluded the EEOC from pursuing "victim specific" relief on the employee's behalf because the EEOC normally "takes the employee as it finds him." However, the Supreme Court rejected this argument and held that the EEOC was not bound by the employee's arbitration agreement.

As a result, employers who rely on mandatory arbitration agreements in the workplace to reduce the costs and potential exposure presented by litigation should be aware that such agreements do not similarly restrict the EEOC from bringing an enforcement action. The good news for employers is that, to date, the EEOC has been reluctant to bring enforcement actions. For example, in 2001, the EEOC brought a total of 431 enforcement actions. This number can be compared to a total of 80,840 EEOC charges of discrimination filed in 2001. Nonetheless, it is important to realize that mandatory arbitration agreements will not insulate an employer from an EEOC enforcement action, nor will they limit the EEOC's ability to seek victim specific remedies on behalf of an aggrieved employee.

Employers who are considering implementing mandatory arbitration programs for their workforce, and those who have already done so, should be aware that courts are more closely scrutinizing the terms of arbitration agreements to ensure that they are "fair" to the employee. Some of the factors courts recently have considered are: (1) does the arbitration agreement require the employee to pay all of the fees associated with an arbitration; (2) does the arbitration agreement preclude the employee from participating in the selection of the arbitrator; and (3) does the arbitration agreement limit the employee's potential remedies, but not the employer's potential remedies? In sum, even though the Supreme Court recently upheld the validity of mandatory arbitration programs in the workplace, employers should be aware that courts are paying close attention to the terms of arbitration agreements to ensure that they are both procedurally and substantively fair to the employee before precluding an employee's right to file a suit in court.

Zachary B. Ward is an associate with AGG and is a member of the firm's Litigation and Employment Law Practice Groups. If you have any questions concerning the issues presented in this article or any other employment related need, please contact Mr. Ward at 404.873.8506 or by e-mail at Zachary.Ward@agg.com, or any other member of AGG's Employment Law Practice Group.

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