Employee or Independent Contractor?

Rescission of Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment

From the Equal Employment Opportunity Commission:

The Commission in 1997 adopted the Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment (July 10, 1997) (Policy Statement).  Since its issuance, the Supreme Court has ruled that agreements to arbitrate employment-related disputes are enforceable under the Federal Arbitration Act (FAA) for disputes between employers and employees.  Circuit City Stores v. Adams, 532 U.S. 105 (2001).  In other arbitration-related cases it has decided since 1997, the Court rejected concerns with using the arbitral forum – both within and outside the context of employment discrimination claims.  Those decisions conflict with the 1997 Policy Statement.

Case law also now makes clear that the EEOC continues to be fully available to employees as an avenue to assert EEO rights and to investigate in the public interest, regardless of whether the parties have entered into an enforceable arbitration agreement.  In 1991, the Supreme Court explained that an arbitration agreement did not preclude an individual’s right to file a charge and have the case investigated by the EEOC.  Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991) (holding that an ADEA claim was subject to compulsory arbitration, but explaining that “an individual ADEA claimant subject to an arbitration agreement will still be free to file a charge with the EEOC.”)    In 2002, the Supreme Court further held that an arbitration agreement between an employer and employee does not bar the EEOC from pursuing victim-specific relief in litigation on behalf of an employee who files a timely charge of discrimination.  EEOC v. Waffle House, Inc., 534 U.S. 279 (2002)

In light of the Supreme Court’s rulings, as detailed below, the Commission now rescinds the 1997 Policy Statement.

Supreme Court Decisions on Arbitration after 1997

The Supreme Court decided many arbitration cases after 1997 that conflict with the Policy Statement, including several that directly implicated allegations of employment discrimination or related federal labor and employment laws:

  • Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998) (holding that a collective bargaining agreement (CBA) could require arbitration of an Americans with Disabilities Act claim if the CBA terms had “clearly and unmistakably” waived the right to pursue claims under the ADA in court);
  • Circuit City Stores v. Adams, 532 U.S. 105 (2001) (holding that the Federal Arbitration Act (FAA) renders most employment-related arbitration agreements enforceable except for those involving “transportation workers” engaged in the movement of goods in interstate commerce, and thus, the plaintiff sales counselor’s state law employment discrimination claims should have been submitted to arbitration).
  • EEOC v. Waffle House, Inc., 534 U.S. 279 (2002) (holding that an arbitration agreement does not bar the EEOC from pursuing victim-specific relief in litigation on behalf of an employee who files a timely charge of discrimination).
  • 14 Penn Plaza L.L.C. v. Pyett, 556 U.S. 247 (2009) (upholding dismissal of an individual’s Age Discrimination in Employment Act claim for arbitration, the Court explained that a CBA clearly and unmistakably requiring union members to arbitrate statutory claims is enforceable, even though the union may subordinate the interests of an individual employee in enforcement of EEO rights to the collective interests of all bargaining unit employees);
  • Rent-A-Center West, Inc. v. Jackson, 561 U.S. 63 (2010) (holding that when the parties delegate authority to determine the enforceability of an arbitration agreement to the arbitrator, challenges to the enforceability of the entire agreement, including arguments over procedural and substantive unconscionability, are for the arbitrator and not the courts to decide in a case raised by a former employee alleging race discrimination and retaliation in violation of section 1981);
  • Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287 (2010) (in holding that questions of arbitrability ordinarily are for the court to decide, the Court noted that questions of arbitrability under a CBA of claims involving tortious interference with contract by promoting a strike in violation of the Labor Management Relations Act are governed by the same rules as agreements that fall under the FAA);
  • Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) (concluding that the FAA requires courts to enforce agreements that compel arbitration of employment-related claims under the Federal Labor Standards Act (FLSA) on an individual basis and employee waiver of class or collective claims).

The Supreme Court also repeatedly addressed arbitration outside the labor or employment discrimination contexts in cases that nonetheless implicated policies taken in the Policy Statement:

  • Eastern Associated Coal Corp. v. United Mine Workers, 531 U.S. 57 (2000) (when arbitrating the terms of a CBA, a court may not reverse the arbitrator’s decision, even for serious error, if the arbitrator acted within the scope of her authority under the CBA);
  • Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000) (concluding that arbitration agreements that are silent regarding fees and costs are not per se unenforceable and that the plaintiff must present evidence that arbitration fees and costs would be prohibitively expensive and show the likelihood of incurring such costs);
  • Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (explaining that issues of “substantive arbitrability” are for the courts to decide [absent agreement by the parties otherwise], while issues of “procedural arbitrability” such as whether time limits, notices, or other conditions precedent to arbitration have been met, are for the arbitrator to decide);
  • Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) (plurality) (noting that courts should decide gateway matters, such as whether the parties have a valid arbitration agreement at all or whether an arbitration agreement applies to a certain controversy, while all other matters of contract interpretation are for the arbitrators to decide);
  • Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (explaining that as “a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract” and therefore arbitration may be imposed where the arbitration agreement was part of an otherwise void contract);
  • Preston v. Ferrer, 552 U.S. 346 (2008) (holding that arbitration agreements covered by the FAA supersede state laws that vest exclusive jurisdiction with some other body);
  • Hall Street Associates, L.L.C. v. Mattel Inc., 552 U.S. 576 (2008) (concluding that the FAA forbids parties from expanding the scope of judicial review of an arbitrator’s award to include “legal error”);
  • AT&T Mobility, L.L.C. v. Concepcion, 563 U.S. 333 (2011) (reversing a finding that a class action waiver was unconscionable, the Court rejected the policy argument that class arbitration was necessary to provide a method for prosecuting low value claims, because it was inconsistent with the FAA’s requirement that arbitration agreements only be subject to revocation “upon such grounds as exist at law or equity for the revocation of any contract”);
  • CompuCredit Corp. v. Greenwood, 565 U.S. 95 (2012) (in holding arbitration cognizable under the Credit Reporting Organizations Act, the Court explained that it had “repeatedly recognized that contractually required arbitration of claims satisfies the statutory prescription of civil liability in court”);
  • Oxford Health Plans L.L.C. v. Sutter, 569 U.S. 564 (2013) (noting that an arbitrator’s decision that “even arguably construes or applies the contract” cannot be reversed, regardless of whether the arbitrator’s decision ultimately was correct, because the parties “bargained for the arbitrator’s construction of the agreement”);
  • American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013) (holding a merchant was subject to the class action waiver in its mandatory arbitration agreement with a large credit card issuer, even though the costs of pursuing the claim would far exceed potential recovery, because “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute elimination of the right to pursue that remedy”);
  • Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2018) (explaining that if the parties agree to have the arbitrator decide gateway questions about whether an issue is subject to arbitration, then creating exceptions to that agreement is inconsistent with the FAA);
  • Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019) (concluding that class arbitration cannot be required where the agreement is ambiguous, because the doctrine of interpreting ambiguous contract terms against the drafter “cannot substitute for the requisite affirmative ‘contractual basis for concluding that the party agreed to [class arbitration]'”).

Therefore, the Policy Statement on Mandatory Binding Arbitration does not reflect current law, is rescinded, and should not be relied upon by EEOC staff in investigations or litigation. Nothing in this rescission should be construed to limit the ability of the Commission or any other party to challenge the enforceability of a particular arbitration agreement.

Source: Recission of Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment

Back to Top