Originally from Employment Arbitration - 2nd Edition

The Effect of an Employment Arbitration Agreement on EEOC Jurisdiction

Thomas E. Carbonneau

(i) The Prior Cases

In the late 1990s, a line of cases developed in the decisional law on arbitration that addressed the question of whether an arbitration agreement between private parties could displace the authority and jurisdiction of government agencies to investigate and pursue remedies on behalf of aggrieved claimants. For example, in Equal Employment Opportunity Commission v. Kidder, Peabody & Co., Inc., the U.S. Court of Appeals for the Second Circuit affirmed a district court ruling that an arbitration agreement between an employer and employee precluded the Equal Employment Opportunity Commission (EEOC) from seeking monetary relief for the employee under the Age Discrimination in Employment Act (ADEA) in federal court. In its ruling, the court stated that “to allow the EEOC to recover monetary damages would frustrate the purpose of the [Federal Arbitration Act] (FAA) because an employee, having signed the agreement to arbitrate, could avoid arbitration by having the EEOC file in the federal forum seeking back pay on his or her behalf.”

The Second Circuit noted that its decision did not prevent the recovery of monetary damages; the individual was free to seek such remedies through the arbitral process. “We see no reason to believe that the threat of an award of monetary damages obtained by a private individual through arbitration has any less deterrent value than the threat of an award of monetary damage obtained by the EEOC.”