There is a strong federal policy in favor of arbitration of claims and disputes . . . isn't there? Apparently, the United States Equal Employment Opportunity Commission ("EEOC" or "Commission") does not believe so, at least with respect to claims of employment discrimination. Recently, the Los Angeles office of the EEOC filed suit to prevent a law firm from requiring its employees to arbitrate any type of federal discrimination claim. This significant move, which undercuts the ability of employers to require mandatory arbitration of these civil rights claims, is partially consistent with the Ninth Circuit's opinion in Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998), prohibiting an employer from requiring mandatory arbitration of Title VII claims. The EEOC's recent action, however, represents an attempt to broaden the rule of Duffield beyond Title VII and extend it to all federal anti-discrimination statutes. Such a broad preclusion of mandatory arbitration agreements has been a prime objective of the EEOC for several years, and the Los Angeles office's suit is wholly in line with a Commission policy statement that was issued well before Duffield. The EEOC's action, however, is in conflict with federal policy and established Supreme Court precedent, leaving many employers with uncertainty regarding their arbitration agreements.
Steps Toward Arbitration
Prior to 1983, the federal court system looked upon the mandatory arbitration of any disputes with a certain measure of disdain. The question of whether arbitration was suitable for discrimination claims was especially met with skepticism, as the judiciary zealously guarded its responsibility as the ultimate enforcer of federal anti-discrimination statutes. With the approach of the 1980's and for a variety of policy related reasons, opposition to arbitration began to fade. Federal courts set aside their long held belief that a judicial forum was the favored means of resolving disputes when the United States Supreme Court recognized that with the passage of the Federal Arbitration Act there was a "congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state, substantive or procedural policy to the contrary." Moses H. Cone Memorial Hosp. v. Mercury Constr. Co., 460 U.S. 1 (1983). Following Moses H. Cone, enforcement of arbitration agreements became a popular trend in federal courts. Along these lines, in 1991 the United States Supreme Court held in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) that employees could be required to arbitrate age discrimination claims brought under the Age Discrimination in Employment Act of 1967 ("ADEA"). The Court reasoned that perhaps not all statutory claims may be appropriate for arbitration, but individual agreements to arbitrate should be enforced, unless Congress has shown some contrary indication in the statute's text, legislative history or through an inherent conflict between arbitration and the purpose of the statute.
At relatively the same time that Gilmer was issued, Congress enacted the Civil Rights Act of 1991, which amended Title VII and spoke directly to the arbitration of such claims. The new Act stated that Title VII plaintiffs in federal court could indeed arbitrate Title VII claims "where appropriate and to the extent authorized by law." Cases dealing with arbitration of statutory discrimination claims, following the 1991 Act, were primarily decided in the context of ADEA claims. Although decisions such as Gilmer are silent as to arbitrability of Title VII claims, there are recognizable similarities between the ADEA and Title VII which district courts have relied upon in compelling arbitration of Title VII claims.
Stepping To Their Own Beat
With federal courts now widely enforcing agreements to arbitrate discrimination claims, the EEOC took notice and began a more than two-year process of developing it's own position on mandatory arbitration. On July 10, 1997, citing its authority as the federal agency charged with the interpretation and enforcement of the nation's employment discrimination laws, the Commission issued a policy statement, on "Enforcement Guidance," declaring that it viewed agreements which mandate binding arbitration of discrimination claims as a condition of employment, contrary to the fundamental principles evinced in anti-discrimination laws. The Commission reasoned that the arbitral process: diminishes the courts crucial role in preventing and deterring discrimination; allows for little public accountability; does not allow for the development of the law; limits claimant rights; and has structural biases against discrimination plaintiffs.
The EEOC, thereafter, instructed its field offices to process discrimination claims, regardless of whether the charging party has agreed to arbitrate employment disputes and closely scrutinize each charge involving an arbitration agreement to determine if the agreement was the product of coercive circumstances, such as a condition of employment. The EEOC stated that it would bring suit, in appropriate cases, notwithstanding a charging party's agreement to arbitrate and continue to challenge the legality of agreements to arbitrate discrimination disputes as a condition of employment.
Although the EEOC had firmly stated that it would resist the trend favoring arbitration, it's decision was advisory policy and not law. In fact, federal courts found little guidance from the policy statement, as they continued to compel arbitration of discrimination claims, where covered by a mandatory arbitration agreement.
A Step Away From The Majority
When the Ninth Circuit issued Duffield on May 8, 1998, it represented a substantial break in the modern trend. In Duffield, the Ninth Circuit ruled that employees cannot be compelled to submit Title VII discrimination claims to binding arbitration. The appellate court unanimously held that the requirement to arbitrate was inconsistent with the Congressional intent to preclude compulsory arbitration of Title VII claims, as evidenced by the "where appropriate and to the extent authorized by law" textual clause of the Civil Rights Act of 1991. The Ninth Circuit's opinion in Duffield was, and remains, an isolated decision that it is a substantial departure from every other circuit who has considered the issue. In fact, five other federal circuit courts have passed on the question of whether Title VII claims may be arbitrated since Duffield and all have reached the exact opposite conclusion. As the Supreme Court has yet to resolve the conflict between the circuits on the issue, as well as the possible limiting effect the decision has on Gilmer and Moses H. Cohen, employers within the Ninth Circuit continue to operate, at least for the time being under the Ninth Circuit rule forbidding mandatory workplace arbitration policies and agreements of Title VII claims.
Stepping up To Duffield And Beyond
On February 7, 2000, the Los Angeles office of the EEOC filed an action which underscored and added to the conflict created by Duffield. The suit, filed in the United States District Court, Central District of California, EEOC v. Luce Forward, Docket No. 01322, claims that requiring mandatory arbitration of discrimination disputes as a condition of employment is a violation of several federal anti-discrimination statutes. The Los Angeles office of the law firm of Luce, Forward, Hamilton & Scripps, hired legal secretary Donald Lagatree in September of 1997 and fired him three days later when he refused to agree to arbitrate any work related disputes with the firm.
The complaint in the lawsuit does not directly state that pre-dispute arbitration clauses cannot be made a condition of employment. Rather it alleges that Lagatree was wrongfully terminated and retaliated against for refusing to waive rights under federal laws, including Title VII, ADEA, ADA and the Equal Pay Act. Notably, the issues presented by the federal lawsuit, have already been presented to and rejected by the California state appellate court in Lagatree v. Luce Forward, 74 Cal.App.4th 1105 (1999).
Although the Luce Forward suit is partially in keeping with the Duffield opinion pertaining to the arbitrability of Title VII claims, it represents an expansive attack on the arbitrability of other federal statutory civil rights claims. The suit is, however, in line with the EEOC's policy statement, which it appears the Commission now hopes to make into law using the narrower Duffield as its base. There are, however, many steps in the Commission's way. It must overcome a marching legion of arguments, lead by the fact that the suit appears to directly contradict Supreme Court authority. Presumably, the Supreme Court itself, must eventually have the final word in clarifying this issue, although it has avoided recent opportunities to do so. For the moment, however, the EEOC's case further clouds the enforceability of mandatory workplace arbitration agreements in the Ninth Circuit. Given the EEOC's aggressive new actions on this subject, employers in the Western United States, currently using mandatory arbitration agreements should contact experienced employment law counsel for advice regarding the validity of existing or intended arbitration language.
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