Can you require employees to sign arbitration agreements? After more than 20 years of saying no, the EEOC has reversed its policy and says you can.

Background

In 1997 the EEOC issued the Policy Statement on Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment (the Policy Statement), setting forth its position. Specifically, the EEOC stated that “unilaterally imposed agreements mandating binding arbitration of employment discrimination disputes as a condition of employment harms both the individual civil rights claimant and the public interest in eradicating discrimination.” Given this position, the EEOC announced it would (1) “closely scrutinize” charges of discrimination involving arbitration agreements to determine whether they were secured under “coercive circumstances,” including as a condition of employment; and (2) challenge the legality of arbitration agreements requiring arbitration of employment disputes as a condition of employment. Whether the EEOC’s policy discouraged mandatory arbitration is debatable. The good news, however, is that the EEOC has reversed its position.

Reversal of Policy

On December 17, 2019, the EEOC issued its Rescission of Mandatory Binding Arbitration of Employment Discrimination Disputes as a Condition of Employment, rescinding the Policy Statement. In rescinding the Policy Statement, the EEOC noted that – since issuance of the Policy Statement – the Supreme Court has ruled that agreements to arbitrate employment-related disputes are enforceable under the Federal Arbitration Act. Noting the court has rejected concerns regarding the use of arbitration for employment-discrimination claims, the EEOC determined the Policy Statement conflicted with Supreme Court precedent and should be rescinded.

That said, the EEOC acknowledged

“[c]ase law also now makes clear that the EEOC continues to be fully available to employees as an avenue to assert EEO rights and to investigate in the public interest, regardless of whether the parties have entered into an enforceable arbitration agreement.”

Additionally, the EEOC stated that rescission of the Policy Statement does not limit its ability to challenge the legality of a particular arbitration agreement.

Takeaways

It is difficult to know the practical impact of the EEOC’s rescission of the Policy Statement. That said, the impact may be limited as it only brings the EEOC’s position in line with existing legal precedent. It could, however, reduce the number of EEOC investigations arising out of the enforceability of arbitration agreements.