The Court declines to extend the FAA to cover federal enforcement actions by regulatory agencies filed on behalf of an employee bound by a forced arbitration clause.

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Equal Employment Opportunity Commission v. Waffle House, Inc., 534 U.S. 279 (2002)
 

Relevant Facts: After completing a form job application, a man was hired to work the grill at his local Waffle House. Weeks into his new job, the man suffered a seizure at work, and was fired shortly thereafter. The man filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) alleging the discharge violated the Americans with Disabilities Act (ADA). The EEOC filed an enforcement action in federal district court seeking injunctive relief, damages to make the employee whole, and punitive damages. Waffle House sought to compel arbitration based on a forced arbitration provision in the job application. The district court denied the motion, finding that, despite the presence of the provision in the application, there was no agreement to arbitrate in the actual employment contract. The appeals court reversed in part, finding a valid arbitration agreement did exist that precluded victim-specific relief, but since the EEOC was not a party to that agreement it was not precluded from bringing the enforcement action.

 

Question Before The Court: Whether an arbitration clause between an employer and employee bars the EEOC from pursuing victim-specific relief in an enforcement action.

 

The Opinion: In addressing the question presented, the Court reviewed the legislative history of Title VII, noting that when Congress originally passed the statute it limited the EEOC’s power to that of an investigative body. However, in 1972, Congress specifically amended the Act to authorize the EEOC to bring its own enforcement actions, and authorized courts to order victim-specific relief, such as back pay, and to enjoin employers from engaging in unlawful employment practices. While the amendments specified the judicial districts where such actions could be brought, they made no mention of arbitration proceedings. In 1991, the legislature again amended Title VII to allow for the award of punitive damages. Based in these facts, the Court concluded that “these statutes unambiguously authorize the EEOC to obtain the relief that it seeks in its complaint if it can prove its case against respondent.”

 

The Court held that, although the employee could be compelled to arbitrate claims he brought on his own behalf, there is no mechanism to preclude the EEOC’s power to investigate the employees’ charges of discrimination, or to obtain the remedies it sought. By law, the “EEOC holds its own independent statutory responsibility to investigate and conciliate claims.” In a prior case, General Telephone Co. of Northwest v. EEOC, 446 U.S. 318 (1980), the Court provided that “the EEOC is not merely a proxy for the victims of discrimination and that its enforcement suits should not be considered representative actions.” The Court pointed out that under Title VII, once a charge is filed, the EEOC has exclusive jurisdiction over the claim for 180 days: “The statute clearly makes the EEOC the master of its own case and confers on the agency the authority to evaluate the strength of the public interest at stake.”

 

Although this nation does have a “liberal federal policy favoring arbitration,” the Court explained, “nothing in the [FAA] authorizes a court to compel arbitration of any issues, or by any parties, that are not already covered in the agreement. The FAA does not mention enforcement by public agencies; it ensures the enforceability of private agreements to arbitrate, but otherwise does not purport to place any restriction on a nonparty’s choice of judicial forum.” Certainly, the Court asserted, “a court [is not permitted] to announce a categorical rule precluding an expressly authorized form of relief as inappropriate in all cases in which the employee has signed an arbitration agreement.”

 

Finding that “the compromise solution reached by the Court of Appeals turns what is effectively a forum selection clause into [an impermissible] waiver of a nonparty’s statutory remedies,” the Court reversed, emphasizing that “a contract cannot bind a nonparty. Accordingly, the pro-arbitration goals of the FAA do not require the agency to relinquish its statutory authority if it has not agreed to do so.” When a party is not bound by the agreement, a court must proceed without regard to the federal policy favoring arbitration.

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