Iowa Supreme Court Says Federal Arbitration Act Does Not Require Plaintiff to Submit to Arbitration to Sue

On February 28, 2014, the Supreme Court of Iowa reversed a decision by the Iowa District Court of Polk County in Rent-A-Center, Inc. (“RAC”) v. Iowa Civil Rights Commission (“ICRC“). The District Court’s 2011 decision would have forced Plaintiff Nicole Henry to arbitrate her discrimination claim against RAC, her former employer, before the ICRC, working in cooperation with the Equal Employment Opportunity Commission (“EEOC“), could initiate any legal action involving her and her employer.

Henry’s original case against RAC concerned the company’s unwillingness to accommodate her pregnancy by imposing a 20-pound lifting restriction as recommended by her doctor. She argued that RAC had made such accommodations for other pregnant employees in the recent past, and that she performed many duties each day that did not require her to lift more than 20 pounds.

The central question in this case was whether the Federal Arbitration Act (“FAA“) required Ms. Henry, who had signed an arbitration agreement with RAC, to arbitrate her dispute before seeking relief against her employer through any legal or enforcement action. District Court Judge Robert B. Hanson had ruled that the FAA did in fact preempt the ICRC’s jurisdiction, under state law, to pursue Henry’s case. Now, disagreeing with Judge Hanson’s ruling, the Iowa Supreme Court finds that the FAA does not bar the ICRC from undertaking administrative proceedings, independently of any contractual obligation by the parties to arbitrate disputes, since the ICRC itself was not a party to the contract between Henry and RAC.

In its decision the Iowa Supreme Court referred to the widely-cited 2002 case E.E.O.C. v. Waffle House, Inc., in which the U.S. Supreme Court found that “an arbitration agreement between an employer and an employee did not bar the EEOC from bringing an enforcement action against the employer to obtain relief for he employee.” The Iowa Court reasoned that the Court’s analysis in Waffle House, which applied to the EEOC at the federal level, also applied more or less straightforwardly at the state level to the ICRC in the present case: in each case, the enforcement agency’s jurisdiction is not preempted by existing arbitration agreements. These agencies have the authority to bring legal actions and seek relief on behalf of particular persons, as part of their general enforcement powers, without regard to arbitration agreements that have been previously entered into by any of the parties.

A key legal question that underlies the Iowa Supreme Court’s decision in these case is whether an agency that pursues a case on behalf of a complainant becomes an agent of that complainant, and thus subject to the same contractual obligation to arbitrate as the complainant him- or herself. On this question the Court’s answer is clear: when an agency chooses to single out a representative case to pursue as part of its enforcement activities, it is not joining the existing action of the person in that existing case. It is starting a new action of its own, exercising independent authority. “We have noted,” writes the Iowa Supreme Court, “that the ‘legislative intent was to permit the (ICRC) to be selective in the cases singled out to process through the agency, so as to better impact unfair or discriminatory practices with highly visible and meritorious cases.'” The agencies’ function is not primarily to represent the complainants in those cases, but to pursue their cases as part of the agency’s own mission. Any obligation a person has to arbitrate a dispute with her employer does not limit the actions that the , or a state-level agency like the ICRC, can take on their behalf.

If you are an employee and you believe your rights have been violated, please contact the Harman Firm P.C.