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Arbitration Clauses and the FLSA, Part III (Filing Charges with the EEOC)

Discrimination Claims 2011

Increasingly, federal courts are enforcing mandatory arbitration clauses written into employee contracts and handbooks.  Employers have taken notice of this.  As of 2003, roughly a quarter of private-sector, nonunion employees were required to arbitrate employment disputes.  It’s a growing trend; the same article observes that, nowadays, more employees are covered by arbitration clauses than by collective bargaining agreements.

And the federal government has taken notice of that, by taking steps to limit the use of employment-related arbitration agreements.  In late July, President Obama signed Executive Order 13673, entitled “Fair Pay and Safe Workplaces,” which prohibits companies holding federal contracts from forcing their employees into mandatory arbitration to resolve workplace disputes.1”Agencies shall ensure that for all contracts where the estimated value of the supplies acquired and services required exceeds $1 million, provisions in solicitations and clauses in contracts shall provide that contractors agree that the decision to arbitrate claims arising under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment may only be made with the voluntary consent of employees or independent contractors after such disputes arise.  Agencies shall also require that contractors incorporate this  same requirement into subcontracts where the estimated value of the supplies acquired and services required exceeds $1 million.”  And a few days ago, the EEOC sued Doherty Enterprises Inc. — which operates Applebee’s, Panera Bread, and other restaurant concepts — for using an arbitration clause in a job-application to prevent applicants or employees from filing discrimination charges with federal agencies.

The Complaint, filed on September 18th in the Southern District of Florida, alleges that Doherty “condition[s] employment on its applicants’ and/or employees’ agreement to sign an Arbitration Agreement that prohibits the filing of charges of discrimination with the EEOC and FEPAs [Fair Employment Practices Agencies].”  The arbitration language appears at the bottom of Doherty’s job application form.  It requires prospective employees to promise that any employment-related claims or disputes, “which would otherwise require or allow resort to any court or other governmental dispute resolution forum . . . shall be submitted to and determined exclusively by binding arbitration.”  That does seem to get very close to explicitly saying that an employee must arbitrate claims that he or she would normally take to the EEOC.  Tellingly, the arbitration agreement preserves an employee or applicant’s ability to turn to a few federal agencies with complaints under certain specific circumstances.

[claims] based on tort, contract, statutory, or equitable law, or otherwise, (with the sole exception of claims arising under the National Labor Relations Act which are brought before the National Labor Relations Board, claims for medical and disability benefits under applicable state and/or local law) shall be submitted to and determined exclusively by binding arbitration.

By authorizing employees and applicants to take certain kinds of complaints to certain federal agencies, the arbitration agreement implies that employees and applicants are not free to take other kinds of complaints to other federal agencies (like the EEOC).2There’s a Latin phrase that seemingly applies here: Unius Est Exclusio Alterius (“the express mention of one thing excludes all others.”).

The EEOC’s position is reasonable.  The agency’s purpose is to enforce federal anti-discrimination laws; the EEOC can’t do that if aggrieved employees or job applicants are prevented from filing complaints or even communicating with it.  It’s early in the case, though, and Doherty’s response will be an important moment.

Still, there are two important questions we can ask at this juncture.  Would it be enough for Doherty to simply remove the offending language from its arbitration agreement, or must Doherty issue new agreements, expressly stating that employees and applicants are free to file charges and communicate with the EEOC and all other federal agencies?  And if the answer is the latter, is that true only for Doherty (given the circumstances in this case) or does the EEOC believe that this type of express language is necessary in all employment-related arbitration agreements?

There’s also one important observation to make at this time.  Doherty’s arbitration agreement also contains a collective action waiver, and the EEOC didn’t challenge it, or even discuss it, in its Complaint.  That means that there is still a lot that business owners can accomplish through the use of an arbitration agreement (in that regard, see our prior post on Arbitration Agreements and the FLSA, Part I (Collective Action Waivers)).

We’ll keep an eye on EEOC v. Doherty Enterprises Inc. (Southern District of Florida, Case No. 9:14 — CV — 81184).  But certainly, even at this early stage, the case underscores the importance of careful contract drafting.  Words matter, and many situations require tailoring, structuring, nuance and foresight.  In other words, good lawyering is needed.  Can’t replace lawyers with robots yet. Take that, IBM Watson.

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