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EEOC Targets Mandatory Arbitration Agreements in Lawsuit against Restaurant Franchisee

A Florida company that owns franchise restaurants, such as Applebee’s and Panera Bread, has been sued by the Equal Employment Opportunity Commission (“EEOC”) for making its employees sign mandatory arbitration agreements.  The lawsuit, filed September 18, 2014 in the U.S. District Court for the Southern District of Florida, is the latest instance of the EEOC targeting employer practices which the agency  views as limiting employees’ right to file charges of discrimination or bring lawsuits under Title VII and other employment discrimination statutes.

According to the agency’s allegations in EEOC v. Doherty Enterprises, Inc. (Civil Action No. 9:14-cv-81184-KAM), the company “requires each prospective employee to sign a mandatory arbitration agreement as  a condition of employment.  The agreement  mandates that all employment-related claims -- which would otherwise allow  resort to the EEOC -- shall be submitted to and deter­mined exclusively by  binding arbitration.”  The EEOC alleges the arbitration agreements interfere with employees' rights to file discrimination charges and “violates Section 707 of Title VII of the Civil  Rights Act of 1964, which prohibits employer conduct that constitutes a pattern  or practice of resistance to the rights protected by Title VII.

The lawsuit is not surprising since the EEOC made it clear in its 2013 – 2016 Strategic Enforcement Plan that “[t]he EEOC will target policies and practices that discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or that impede the EEOC's investigative or enforcement efforts.”  However, while these type of “test” cases by the agency result in substantial legal costs for employers, the EEOC does not seem to have been getting much bang for its buck when it actually gets in front of a federal judge.

As noted in my September 21, 2014 posting, “EEOC Experiences “Separation Anxiety”in Lawsuit Against CVS”, last week the EEOC suffered a big defeat in their controversial lawsuit against CVS Pharmacy, over the drug store chain’s use of separation agreements for departing employees.  In that lawsuit, the EEOC had taken the same approach as it has in this latest case, alleging the drug store chain’s use of very standardized separation agreements demonstrated a pattern and practice of CVS interfering with employees' Title VII in a way that “deters the filing of charges and interferes with employees' ability to communicate voluntarily with the EEOC.” 

In comments about the agency’s lawsuit against Doherty Enterprises, EEOC Regional Counsel Robert E. Weisberg left little doubt that more lawsuits over arbitration agreements can be expected:

"Employee communication with the  EEOC is integral to the agency's mission of eradicating employment discrimination.  When an employer forces all complaints about  employment discrimination into confidential arbitration, it shields itself from  federal oversight of its employment practices.   This practice violates the law, and the EEOC will take action to deter further use of these types of overly broad arbitration agreements."

As was the case of separation agreements in the CVS lawsuit, mediation agreements are commonly used by employers nationwide, and the EEOC’s litigation focus is troubling to the business community.  For employers who utilize arbitration agreements, it would be advisable to have them reviewed by legal counsel.

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About Mark Fijman

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Mark Fijman specializes in labor and employment issues relating to the restaurant and hospitality industry, including Fair Labor Standards Act ("FLSA") compliance. He is an attorney in the Labor and Employment Section of law firm Phelps Dunbar, LLP’s Jackson, Mississippi office. He can be contacted at (601) 360-9716 or

Fijman represents and advises employers regarding federal and state employment laws dealing with race, age, disability, gender, national origin and religious discrimination and in administrative proceedings before the Equal Employment Opportunity Commission. His practice includes representing employers seeking to enforce non-competition/non-solicitation agreements and pursuing injunctive relief for improper use of proprietary information.He routinely counsels on issues ranging from overtime questions to discipline and termination decisions. Direct phone: (601) 360-9716.  Phelps Dunbar, LLP has offices in New Orleans, LA, Baton Rouge, LA, Houston, TX, Tampa, FL, Mobile, AL, Raleigh, NC, Jackson, MS, Gulfport, MS, Tupelo, MS and London, England.

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