SUPREME COURT LENGTHENS ARM OF THE EEOC
Employees given new opportunity to collect damages

Equal Employment Opportunity Commission v. Waffle House, Inc., No. 99-1823 (U.S. Supreme Court)

On January 15, 2002, in a 6-3 vote, the U.S. Supreme Court allowed the Equal Employment Opportunity Commission to litigate back pay, compensatory damages and reinstatement on behalf of Eric Baker, a Waffle House grill cook who had entered into a mandatory arbitration agreement. Baker filed a wrongful discharge complaint with the EEOC under the Americans with Disabilities Act (ADA) after he suffered a seizure and was fired. The Supreme Court decided that since the EEOC was not a party to Baker’s arbitration agreement, its complaint was not bound to an arbitration forum. In addition, the high court found that the ADA and Title VII of the Civil Rights Act of 1964 specifically grant the EEOC its choice of forum and relief, regardless of the venue of the original complaint. This enabled the EEOC not only to bring its case to court but to pursue several remedies and individual damages on Baker’s behalf. Prior to this decision, Baker would have been limited to an arbitration forum to recover remedies and damages, and Waffle House would not have to face the possibility of a jury, escalating court costs and attorney fees, and the other consequences of protracted litigation.

Another aspect of EEOC v. Waffle House which potentially disadvantages employers with arbitration agreements is the fact that it allows an employee to seek damages through arbitration or settlement and simultaneously permits the EEOC to pursue individual damages in court. The more generous ruling would prevail, so that if an arbitrator awarded an employee $10,000 and the EEOC was awarded $50,000 on the employee’s behalf, the employer would have to pay the $50,000 plus possibly an additional sum for court costs and attorney fees.

Savor for a moment the irony of this ruling following on the heels of Circuit City v. Adams (2001) where the Supreme Court gave employers a virtual green light to save time and money through enforceable arbitration agreements. But before you trash your arbitration agreement (and the attorney it rode in on), let’s get perspective. This decision did not affect the Waffle House arbitration agreement or arbitration agreements in general. It focused on the statutory powers of the EEOC as contained in the ADA and Title VII of the Civil Rights Act of 1964. Shea Stokes & Carter continues to advocate the use of binding arbitration agreements as part of an employment contract. Your mandatory arbitration agreement is still a valuable tool in keeping your employment disputes out of court. Arbitration remains the most efficient means to resolve employee complaints, and it will continue to save you time and money while still allowing you and your employees access to the same relief and remedies available through lengthy and expensive litigation.

If you are still asking yourself whether the scenario in EEOC v. Waffle House could happen to you, the chance that the EEOC would try to circumvent arbitration and take your employment dispute to federal court is about as likely as accurately guessing the number of jelly beans in a jar. Out of the 79,896 charges filed with the EEOC in 2000, they found only 10 percent or 8,248 to be meritorious. The EEOC then continued to sharpen its focus and filed complaints against only 3% of the qualifying cases for a grand total of 291 lawsuits. In the final analysis, the EEOC litigated less than 1 percent of its nearly 80,000 original complaints.

The EEOC Compliance Manual contains the secret of the EEOC’s selectivity. The EEOC seeks to “vindicate the public interest in preventing employment discrimination.” In addition to backing class action suits, the EEOC’s idea of public interest often means pursuing highly visible employers, employers with a string of alleged violations, and/or employers they believe have behaved with “malice or reckless indifference.” Unfortunately for Waffle House, it met all three criteria. The EEOC considered Baker’s discharge intentional and malicious in light of Baker’s obvious disability and Waffle House’s egregious lack of reasonable accommodation. The EEOC’s complaint also cited Waffle House’s “past and present unlawful employment practices.” The EEOC no doubt recalled Waffle House’s tremendous loss of $8 million in damages in 1997 as a result of alleged sex discrimination against a management recruiter, not to mention several less publicized cases. Finally, regarding visibility, Waffle House owns or has franchises on 1,300 restaurants throughout 26 states and claims to be the world’s leading server of breakfast items. Their motto? “America’s place to work–America’s place to eat.”

You should not allow this new Supreme Court ruling to discourage you from using mandatory arbitration to your advantage. It does not affect the Federal Arbitration Act, nor does it affect the enforcement of lawful arbitration agreements. Your lawful arbitration agreement is still good. However, you may want Shea Stokes & Carter to review your arbitration agreement to ensure that it conforms to new state and federal law on the necessary conditions which make such agreements enforceable.

And remember, if you follow Shea Stokes & Carter's Preventive Program© for Employee Relations, you will not commit or appear to commit a pattern of discriminatory behavior that would attract the attention of either your employees or the EEOC. If you still think that you might fall within that scant one percent of employers who might actually face the EEOC in federal court, don’t despair. You have an equal chance of also winning the lottery.