As part of an ongoing project to update its guidance and technical assistance documents, the Equal Employment Opportunity Commission (“EEOC”) last week issued a statement rescinding its 1997 Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment (the “Policy Statement”). EEOC policy statements do not have the force of law, but they are often relied on as guidance by both EEOC investigators and courts. Last week’s announcement brings the EEOC’s policies in line with recent Supreme Court decisions recognizing the enforceability of employment-related arbitration agreements under federal law; however, the enactment of several state statutes restricting the use of such agreements in the #MeToo era leaves the terrain unsettled.
The EEOC rescinded the 1997 Policy Statement—which had deemed mandatory arbitration of employment-related disputes inconsistent with the purposes of Title VII and other federal civil rights laws—because the Policy Statement conflicted with subsequent Supreme Court decisions holding that employment-related arbitration agreements are generally enforceable under the Federal Arbitration Act (“FAA”). The EEOC’s rescission announcement referenced numerous Supreme Court cases, including Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), which held that arbitration agreements waiving class or collective claims are enforceable (see our prior post here ), and Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), which held that class arbitration of employment disputes is not required when an arbitration agreement is ambiguous as to the arbitrability of class claims (prior post here).
The EEOC’s announcement also emphasized the Supreme Court’s holding in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991), that employees subject to arbitration agreements can still file EEOC charges and states that “[n]othing in this rescission should be construed to limit the ability of the Commission or any other party to challenge the enforceability of a particular arbitration agreement.” In 2014, the EEOC sued an employer whose arbitration agreements allegedly required employees to give up their right to file charges with the EEOC or state and local fair employment practices agencies. The employer ultimately prevailed before a federal district court, but the case remains pending before the U.S. Court of Appeals for the Eleventh Circuit. It remains unclear how vigorously the EEOC will challenge what it perceives to be overbroad arbitration agreements going forward.
The EEOC’s rescission announcement did not address recently enacted state laws restricting mandatory arbitration of sexual harassment and/or other discrimination claims in the wake of #MeToo—including, for example, California AB 51, which goes into effect January 1, 2020 (see our post here), and similar laws in Maryland, New Jersey, and New York (prior posts here, here, and here). As explained in our previous posts, it is uncertain whether these laws will be considered preempted by the FAA, and at least one federal district court has already compelled arbitration pursuant to the FAA notwithstanding New York’s law prohibiting mandatory arbitration of discrimination claims.
Employers should continue to monitor developments with the assistance of counsel in this rapidly changing area of law.