On December 17, 2019, the U.S. Equal Employment Opportunity Commission (“EEOC”) rescinded its 22-year-old policy statement disapproving of mandatory employment arbitration agreements for workplace bias claims. The agency’s 2-1 decision to retract this policy was in direct response to numerous U.S. Supreme Court rulings that support the use of such agreements.
EEOC’s 1997 Policy Statement
The EEOC’s 1997 Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment strongly opposed the use of such agreements, concluding that “[t]he use of unilaterally imposed agreements mandating binding arbitration of employment discrimination disputes as a condition of employment harms both the individual civil rights claimant and the public interest in eradicating discrimination.” The agency reasoned that the federal government has the primary responsibility for enforcing federal employment discrimination laws, and the courts are responsible for the development and interpretation of such laws. The policy statement further explained that the public nature of the judicial process enables the public, higher courts, and Congress to ensure that discrimination laws are properly interpreted and applied, and the private right of action—with its guarantee of individual access to the courts—is essential to the statutory enforcement scheme. Therefore, the EEOC took the position that mandatory arbitration of employment discrimination disputes improperly “privatizes” enforcement of the federal employment discrimination laws, and in so doing, undermines public enforcement of such laws.
Reasons for the Rescission
In the 22 years since the EEOC issued this guidance, the U.S. Supreme Court decided many arbitration cases that support the use of arbitration agreements, some of which directly implicated allegations of employment discrimination or related federal employment laws. For example, in 2001, the Court ruled that agreements to arbitrate employment-related disputes between employers and employees are enforceable under the Federal Arbitration Act. In other arbitration-related cases, the Court rejected concerns about the use of arbitration—both inside and outside the context of employment discrimination claims. Those decisions conflict with the 1997 Policy Statement, and therefore the EEOC decided to retract its policy because it does not reflect current law.
Further, the EEOC explained that case law “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.” The Supreme Court has explained that an arbitration agreement cannot and does not preclude an individual’s right to file a charge and have the case investigated by the EEOC. Moreover, the Supreme Court has 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.
Considering the Supreme Court’s rulings, the EEOC rescinded the 1997 Policy Statement, but notably insists that “[n]othing in this rescission should be construed to limit the ability of the EEOC or any other party to challenge the enforceability of a particular arbitration agreement.”
Impact of This Decision on Employers
With Supreme Court jurisprudence squarely supporting the lawfulness and enforceability of employment arbitration agreements, many employers have adopted arbitration programs as a means to reduce the time and expense of resolving disputes with employees, and to do so in a private forum rather than in federal or state court proceedings. Practically speaking, the EEOC’s rescission of its policy statement likely will have little to no impact on the way courts assess mandatory arbitration agreements, as courts must follow the law established by the Court, not statements of policy issued by federal agencies. However, even though the notice of rescission pointed out that the EEOC retains the right to pursue litigation that it believes is in the public interest, and that it may still challenge the enforceability of arbitration agreements it deems invalid, the rescission of the policy provides further assurances to employers that efforts to implement alternative methods of resolving disputes with employees will hold up in court.
N.B.: It is also worth noting that the guidance regarding mandatory binding arbitration of employment discrimination disputes was not the only former policy the EEOC rescinded. A full list of all the retracted guidance documents can be found here. As always, we will continue to provide updates on changes to the EEOC’s policy and guidance as they arise.