Mises Daily Articles

Facebook icon
LinkedIn icon
Twitter icon
Home | Mises Library | Courts, Contracts, and the EEOC

Courts, Contracts, and the EEOC

  • Waffle_House.jpg

Tags Legal System

07/30/2002David F. Dieteman

On January 25, 2002, the United States Supreme Court delivered its opinion in Equal Employment Opportunity Commission v. Waffle House, Inc.

The question addressed in Waffle House is whether a private contract to arbitrate employment disputes prevented the EEOC from seeking "victim-specific" relief from an employer (e.g., money for the employee) as opposed to injunctive relief (e.g., a court order prohibiting similar actions in the future).

Eric Baker, an employee of Waffle House, signed a job application that contained a mandatory arbitration provision. Specifically, the agreement provided that:

"The parties agree that any dispute or claim concerning Applicant’s employment with Waffle House, Inc., . . . including whether such dispute or claim is arbitrable, will be settled by binding arbitration.

Sixteen days after he began his employment, Mr. Baker suffered a seizure at work. Shortly after that, he was fired.

Despite the express terms of the job application, Mr. Baker never initiated arbitration proceedings with Waffle House. Instead, Mr. Baker filed a charge of discrimination with the EEOC, alleging that his firing was contrary to the Americans with Disabilities Act. (The South Carolina Human Rights Commission also investigated the matter, but found no basis for a lawsuit).

The EEOC attempted to resolve the claim. When this proved unsuccessful, the EEOC filed suit in federal court. In response, Waffle House filed a petition to stay the federal court action and compel arbitration.

Ultimately, the Fourth Circuit U.S. Court of Appeals ruled that the arbitration clause of the employment contract prevented the EEOC from seeking victim-specific relief. The Fourth Circuit reasoned that the federal policy (outlined in the Federal Arbitration Act) favoring enforcement of private arbitration contracts outweighed the minimal public interest in the case. Rather than defending any public interest, the EEOC was seeking to benefit Mr. Baker’s private interests via an award of back pay, reinstatement, and damages.

The Fourth Circuit, on the other hand, found that the EEOC’s request for a court order compelling Waffle House to institute policies for qualified individuals with disabilities was not barred by the arbitration agreement. Waffle House, by the way, did not appeal this part of the Fourth Circuit’s decision.

Enter the Supreme Court.

According to Justice Stevens, the contract between Mr. Baker and Waffle House providing for arbitration does not change "the EEOC’s statutory function or the remedies that are otherwise available."

This is true, he claims, even though "federal statutory claims may be the subject of arbitration agreements that are enforceable;" such arbitration agreements do not waive a party’s federal rights, they merely submit their adjudication to an arbitrator, rather than a court. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).

The statutes, contends Justice Stevens, "unambiguously authorize the EEOC to obtain the relief that it seeks in its complaint if it can prove its case against respondent."

Indeed, as the majority adds in a footnote, "[i]f injunctive relief were the only remedy available, an employee who signed an arbitration agreement would have little incentive to file a charge with the EEOC."

That, presumably, is the point. Private employers such as Waffle House enter into contracts for arbitration in an effort to minimize legal expenses. While this is beneficial for employers and employees, it is not beneficial to bureaucrats who fret over a reduced caseload.

The majority opinion, however, comes down in favor of preserving the reach of intrusive agency powers at the expense of such private agreements.

Thankfully, for the sake of reason if not the rule of law, there is a dissent (Justice Thomas, joined by Chief Justice Rehnquist and Justice Scalia).

As Justice Thomas points out, "while the EEOC has the statutory right to bring suit, it has no statutory entitlement to obtain a particular remedy."

This is a matter of both statute and common sense. The remedy that is appropriate in one case is not automatically appropriate in all cases. Thus, Thomas observes, "the plain language of [the statute] makes clear that it is the court’s role to decide whether ‘to enjoin the defendant…and order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement…with or without back pay…or any other equitable relief as the court deems appropriate.’ " (emphasis in original).

The essential point to be grasped is this: The EEOC, as a federal agency, has only those powers delegated to it by the Congress. While Congress has given the EEOC ability to seek relief, Congress has not given the agency an entitlement to any and all forms of relief in any and all cases.

As Justice Thomas summarizes, "The EEOC . . . should not be able to obtain victim-specific relief for Baker in court through its own lawsuit here when Baker waived his right to seek relief for himself in a judicial forum by signing an arbitration agreement."

What, then, has the majority done?

"By allowing the EEOC to pursue victim-specific relief on behalf of Baker under these circumstances, the Court eviscerates Baker’s arbitration agreement with Waffle House and liberates Baker from the consequences of his agreement," writes Justice Thomas.

That, of course, is entirely the point.

"The EEOC may seek relief for an employee who has signed an arbitration agreement unless that employee decides that he would rather abide by his agreement than arbitrate his claim," Thomas concludes.

Rest assured that very few terminated or disgruntled employees will choose to sit back and do nothing when the possibility of a lawsuit is waved in front of their noses.

But it gets worse. Following the logic of the Waffle House majority, Thomas notes, leads to absurdity. If the EEOC cannot be limited by a private agreement to arbitrate, then the EEOC logically cannot be prevented from bringing suit on behalf of employees who have signed settlement agreements. An employee who is not bound by his employment contract should not be bound by any other contract. In which case, why have contracts?

Again, that is the point. The majority opinion, in the guise of interpreting statutes, stands for the proposition that limits on government power, if any, are to be of small consequence. The law of contracts, which serves to ensure tranquility and profitability by limiting and protecting everyone’s spheres of individual control (i.e., property), is to be disregarded in the name of the magic word of the omnipotent state: equality.

As Justice Stevens approvingly writes,

"In fact, the EEOC takes the position that it may pursue a claim on the employee’s behalf even after the employee has disavowed any desire to seek relief. 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."

Make no mistakes: this is the nature of the monstrosity that is the federal government.

The reality of governmental programs designed to "help" people is that such programs are their own justification for existence. Don’t want to press a claim to vindicate your own rights? Never mind, a bureaucrat will decide whether the "public interest" requires a claim to be brought on your behalf.

One wonders at the continuing evolution of American law. The possibility of new federal programs, such as the proposed "Department of Homeland Security," is always worrisome. More statutes and more power to spy on Americans necessarily means less freedom in "The Land of the Free."

The fight that must be fought, however, is not only against such open and advertised restrictions on American liberties. As illustrated in Waffle House, by the Supreme Court’s expansive view of the power of the EEOC, it must be remembered that those federal agencies already in existence pose grave dangers to liberty as well.


Image source: commons.wikimedia.org
Shield icon interview