Anti-Bias Agency Can Sue, Despite Arbitration Deals

Federal civil rights lawyers can sue employers and win money damages for workers who have suffered discrimination, even when the workers have signed an agreement to arbitrate their disputes with management, the Supreme Court ruled Tuesday.

The 6-3 decision marks a partial reversal of a pro-arbitration ruling handed down a year ago.

Its practical effect may be limited, however, since the U.S. Equal Employment Opportunity Commission, the agency charged with enforcing the nation’s job discrimination laws, intervenes in fewer than 1% of the job bias cases filed each year.

But with as many as 10% of U.S. workers covered by an arbitration clause, workers’ rights advocates said it was crucial that government lawyers retain the power to come to the aid of ordinary workers who face discrimination, especially when their companies have an advantage over them.

The case that reached the high court illustrated just that point.

Eric Baker had been hired as a $5.50 per hour cook at a Waffle House restaurant in Columbia, S.C., but he was fired shortly after suffering a seizure at work.

Baker later tried to sue his employer for illegal discrimination, but the restaurant chain countered that he had signed a standard employment agreement promising to arbitrate “any dispute or claim” involving his job.

A federal judge and the U.S. Court of Appeals agreed that Baker’s agreement barred him from suing his employer in court.

But the EEOC took up Baker’s case, and its lawyers argued that it would be unfair to force a low-wage worker into private arbitration.

Hiring a judge for a few days can cost as much as $5,000, and an arbitration agreement typically calls for both sides to split the cost. Even if they were fired unfairly and in violation of the law, many workers would be denied a hearing if they had to pay for the arbitration, the agency said.

The Supreme Court took up the case of EEOC vs. Waffle House, 99-1823, to consider whether arbitration agreements must always be honored, but ruled instead that the agency’s lawyers have the authority to sue on behalf of individual workers.

“A straightforward reading of the law” makes clear that Congress wanted the EEOC to have the freedom to enforce the antidiscrimination laws, Justice John Paul Stevens said for a liberal majority.

The agency can seek back pay, reinstatement or money damages on behalf of an individual worker, or it can take up the claims of groups of workers, he said.

The agency’s authority extends across the spectrum of federal job discrimination laws, which prohibit job bias based on an employee’s race, religion, gender, national origin, age or disability.

“This is the right decision because it recognizes the EEOC is furthering the public interest when it prosecutes cases of employment discrimination,” said EEOC Commissioner Paul Miller, a Clinton appointee. “It’s an inherently unfair situation if a company can say, ‘You must sign this binding agreement giving up your rights if you want a job here.’ ”

Although the agency enforces the anti-bias laws, discrimination claims are handled by private lawyers. In 2000, 79,896 complaints of employment discrimination were filed, but only 402 resulted in lawsuits by the EEOC, the commission said.

Until Tuesday, the tide had been flowing strongly in the direction of binding arbitration for job disputes.

A year ago, the justices appeared to clear the way for employers nationwide to insist on arbitration as a condition of getting a job. On a 5-4 vote, the high court ruled these private arbitration agreements must be honored by the courts.

This ruling, in Circuit City Stores vs. Adams, tossed out a lawsuit brought by a gay computer salesman from Napa who said he had been harassed by his co-workers and a supervisor. He had sued under the state’s civil rights laws.

But the Supreme Court’s conservative majority said that because the salesman had signed an arbitration agreement, he was blocked from going to court. Its opinion relied on the Federal Arbitration Act of 1925, a measure originally intended to protect commercial agreements between shippers and merchants.

Last year’s case did not address the status of the EEOC, however. This year, Justices Sandra Day O’Connor and Anthony M. Kennedy switched sides and joined the liberal bloc to uphold lawsuits filed by the EEOC.

Justice Clarence Thomas, a former EEOC chairman, dissented and complained that “employees will be allowed two bites at the apple.” They can bring an arbitration claim against their employer, and, later, the EEOC can file a suit in court on their behalf, he said. He was joined by Chief Justice William H. Rehnquist and Justice Antonin Scalia.

Advocates for employees had mixed reactions to the ruling.

“It’s nice to see the Supreme Court isn’t going to force arbitration on workers in all cases when they don’t want it,” said Lewis Maltby of the National Workrights Institute in Princeton, N.J. Arbitration can be beneficial, he said, but only if it is fair and voluntary.

Cliff Palefsky, a San Francisco attorney who represents employees, called the decision “correct, but narrow. It does not provide any real help for the millions of employees who have lost their ability to enforce their civil rights. The EEOC does not have the resources to help all the people who need it. There is still a desperate need for new legislation.”

Reps. Barney Frank (D-Mass.), Henry A. Waxman (D-Los Angeles) and 33 other House Democrats have introduced a bill that would allow workers to sue on their own behalf regardless of arbitration agreements.

Business lawyers were also divided.

U.S. Chamber of Commerce attorney Stephen Bokat said the ruling was a minor setback. “We are certainly strong proponents of arbitration, and this is not the outcome we would have liked. But the EEOC gets active in only a small number of cases,” he said.

Employers say arbitration is quicker and cheaper than litigation, and just as fair.

Lawrence Lorber, a Washington business lawyer, worried that the ruling would undercut the attractiveness of arbitration for corporations. “It takes away the incentive to set up arbitration if you can’t be sure it will resolve the matter,” he said.

But San Francisco attorney Garry Mathiason, whose firm represents thousands of employers, said the ruling would strengthen arbitration in the long run.

“This puts the EEOC in the role of policeman. They can police bad arbitration systems and bring more balance and fairness to the system,” he said.