Nothing ventured, nothing gained.
Last night, I read a Pennsylvania federal court decision about an employer who tried to use an arbitration agreement with its employee to stop an investigation by the Pennsylvania Human Relations Commission (PHRC), the state’s version of the U.S. Equal Employment Opportunity Commission.
Consistent with a liberal federal policy favoring arbitration agreements, the Federal Arbitration Act permits a party with an arbitration agreement to petition a federal court for an order requiring the parties to arbitrate.
Indeed, in this particular lawsuit, the employer argued that its arbitration agreement with the employee covered his age discrimination claims with the PHRC and required that any such disputes be decided exclusively through mandatory binding arbitration. If correct, the employer would be entitled to an injunction while the dispute moved from the PHRC to arbitration.
But the employer was incorrect.
There’s a Supreme Court case called Gilmer v. Interstate/Johnson Lane Corporation, where the Court was called upon to decide whether an employer could compel an employee to arbitrate claims brought under the Age Discrimination in Employment Act (ADEA). The answer was yes. However, the Court explained that “an individual ADEA claimant subject to an arbitration agreement will still be free to file a charge with the EEOC, even though the claimant is not able to institute a private judicial action.” Thus, it distinguished between administrative charges of employment discrimination and subsequent lawsuits: the latter are subject to compulsory arbitration, but the former are not.
Acknowledging that the employer “tried something creative,” the Pennsylvania federal court was nonetheless unpersuaded that the claim of discrimination before the PHRC, an administrative agency, belonged in arbitration unless and until a private judicial action followed.
Plus, the express language of the arbitration agreement was enough to halt the employer’s efforts to arbitrate pre-litigation claims: “[N]othing in this [arbitration agreement] prevents the investigation by a government agency of any report, claim or charge otherwise covered by this [arbitration agreement].” I’m guessing your arbitration agreements — I’ll wait while you grab a copy — say the same thing.
But even if they don’t, Gilmer protects administrative charges from arbitration.
So, the next time you receive a charge of discrimination, consider alternatives to arbitration or investigation, like mediation. I’ll talk more about that tomorrow.