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A setback for arbitration from U.S. Supreme Court?

Issue @ Large

Arbitration is an alternative to court proceedings. The procedure has been with us for centuries. Its historical use has been in complex business, construction and labor disputes.

Over the past few decades, the inclusion of arbitration provisions in agreements has grown tremendously. Once found primarily in construction and labor agreements, arbitration provisions are now found in most commercial and consumer contracts. Subject to the traditional challenges to enforceability of all contracts, e.g., fraud, duress, coercion, federal and state courts in Mississippi uniformly enforce agreements to arbitrate. A recent decision of the United States Supreme Court has limited the use of arbitration.

On Jan. 15, 2002, the court, by a 6-3 decision, in Equal Employment Opportunity Commission v. Waffle House Inc., held that the Equal Employment Opportunity Commission (EEOC) was not bound by an agreement between Waffle House and its individual employee to arbitrate any dispute arising under the employment agreement between them. Federal statutes give EEOC authority to seek relief for the specific employee, as well as broader injunctive relief prohibiting the same action against other employees. The court reasoned that inasmuch as the EEOC was not a party to the arbitration agreement, its statutory powers could not be controlled by a private contract between an employee and employer.

The agreement between Waffle House and its employee to arbitrate their employment differences is not binding on EEOC. The dissent, authored by Justice Clarence Thomas, former head of the EEOC, argued that the effect of the decision was to hold that the EEOC could act on behalf of an individual employee in a manner in which the employee had contracted not to act on behalf of himself.

This decision does not evidence an anti-arbitration attitude. It is believed that the effect of this decision will be limited to those unique situations, such as employment contracts, where the law creates a claim to be asserted by an individual employee and, at the same time, by a federal agency such as the EEOC. These situations are unique, and do not, for example, exist in the traditional commercial and consumer transactions.

Although this decision may create some confusion as to arbitration in employment contracts, it is not believed that it will impede the growth of arbitration in other areas.

Harold D. Miller Jr. is an attorney with Butler, Snow, O’Mara, Stevens & Cannada, PLLC and an adjunct professor at the Mississippi College School of Law in Jackson.


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