Last month, the U.S. Equal Employment Opportunity Commission (EEOC) surprisingly announced that it was formally rescinding its longstanding “Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment,” which took the position that mandatory arbitration provisions between employers and employees were contrary to federal antidiscrimination laws.
Originally issued in July 1997, the EEOC’s policy statement expressed its position that mandatory arbitration agreements could have “chilling effects” on charge filing because employees (1) may not be aware of their right to nonetheless file an EEOC charge despite such an agreement; or (2) might otherwise be discouraged from coming to the EEOC when they know that they cannot litigate their claim outside of arbitration. The policy statement also identified overall concerns with arbitration, arguing that, by its nature, arbitration does not allow for development of case law, lacks certain constitutional and procedural safeguards afforded by the federal court system, and includes structural biases against discrimination plaintiffs.
Yet, in its recent announcement that it is rescinding the policy statement, the EEOC recognized that case law has now made it abundantly clear that regardless of any mandatory arbitration provision “the EEOC continues to be fully available to employees as an avenue to assert EEO rights and to investigate the public interest.” The EEOC also explained that this reversal came after repeated decisions by the U.S. Supreme Court to enforce agreements between employers and employees to arbitrate disputes under the Federal Arbitration Act. Further, the EEOC noted that the U.S. Supreme Court had issued a number of arbitration decisions over the last two decades, inside and outside the employment discrimination context, rejecting concerns with the arbitral forum such as those expressed in the 1997 policy statement.
As part of its announcement, the EEOC directed its staff not to rely on the policy statement in investigations or litigation, but clarified that its abandonment of the policy statement does not limit its ability to challenge the enforceability of any particular arbitration agreement or provision.
The EEOC’s reversal follows a growing trend among other federal agencies to realign with the U.S. Supreme Court’s growing Federal Arbitration Act jurisprudence, such as the National Labor Relations Board’s recent decision expressly authorizing employers to implement arbitration agreements that include collective waivers. However, at the state level, a number of jurisdictions, such as New York and California, have banned mandatory arbitration agreements for certain discrimination claims, particularly in light of the #MeToo movement. Federal courts have yet to resolve whether the Federal Arbitration Act preempts these state restrictions.
Particularly for employers, the EEOC’s announcement abandoning the 1997 policy statement underscores the importance of ensuring that agreements with arbitration provisions contain language explicitly excluding filing a charge with the EEOC and cooperating with the EEOC overall. Additionally, employers should make sure that arbitration provisions are drafted clearly and avoid ambiguities as the EEOC will likely continue scrutinizing such provisions.
For more information on developments in this area, please contact Betty Graumlich or the Reed Smith lawyer with whom you normally work.