Labor and Industry Review Commission Takes on Arbitration Provisions

August 9, 2018

In this case, the Wisconsin Labor and Industry Review Commission (LIRC) interpreted and decided what an employer and employee can and cannot contract for when it comes to waiving or arbitrating discrimination claims arising under the Wisconsin Fair Employment Act (WFEA). The decision gives employers one more thing to think about when considering whether to have their employees sign an arbitration agreement as part of their employment.

Procedural History

Michael Ionetz began his employment with Menards on April 28, 2016. He signed an employee/employer agreement, which included a provision mandating arbitration for the resolution of all employment disputes, including discrimination claims.

A few months later, in August, Ionetz was promoted to assistant department manager. At that time, he signed another employee agreement. The acceptance page of that agreement put him on notice that “any and all claims shall be resolved by binding arbitration” and incorporated by reference Menards’ Manual for Department and Assistant Department Managers, which set forth the arbitration provision. Federal, state, and common-law claims were subject to binding arbitration under the provision, and it constituted “an express waiver of the right to court, jury, or administrative review or to participate in a class action.”

On February 27, 2017, Ionetz filed a complaint with the Department of Workforce Development’s Equal Rights Division (ERD) alleging he was terminated in retaliation for having opposed discrimination in the workplace, in violation of the WFEA. On August 7, the ERD equal rights officer issued an initial determination finding no probable cause to believe discrimination occurred, and Ionetz appealed.

On September 25, Menards filed a motion to compel arbitration, arguing that the employment agreement that Ionetz signed contained a mandatory arbitration clause and, therefore, his ERD complaint should be dismissed in deference to arbitration. An administrative law judge (ALJ) issued an order of dismissal based on the mandatory arbitration provision in the employee agreement. Ionetz petitioned LIRC for review.

The Arbitration Provision

In addition to requiring that all employment-related disputes be resolved through arbitration, the arbitration provision in the Menards manual also included a limited “right to file” or “right to participate” clause, stating:

Nothing in this Manual infringes on your ability to file a claim or charge of discrimination with the U.S. Equal Employment Opportunity Commission [EEOC] or comparable state or local agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, filing a lawsuit in Federal or state court in their own name, or taking any other action authorized under these statutes. You understand that you have the right to participate in such action. If you file a complaint or charge with any federal, state, or local administrative agency, such agency will have exclusive jurisdiction until they either dismiss your complaint or charge or issue a “Right to Sue” notice to you.

LIRC noted the commonness of right-to-file/right-to-participate provisions, also known as “agency rights” provisions. Charges filed with the EEOC carry two potential claims for relief—the employee’s claim for individual relief and the agency’s claim to vindicate the public interest in preventing employment discrimination. The EEOC and the federal courts have insisted that any limitations on the right to file a charge or to participate in an EEOC investigation are void as a matter of public policy because they interfere with the investigative and enforcement jurisdiction of the agency.

The question that LIRC had to answer in this case was what effect, if any, the agency clause in the Menards agreement had on the ERD’s jurisdiction to investigate and enforce Ionetz’s state claim, notwithstanding the agreement to arbitrate. In answering the question, LIRC compared and contrasted the authority of the EEOC and the ERD.

Unlike the broad investigative, enforcement, and prosecutorial authority granted to the EEOC, LIRC found the ERD’s statutory authority is limited to that of an adjudicative body, charged with deciding particular disputes filed under the WFEA. Unlike the EEOC, the ERD has no independent authority to prosecute claims for violations of the WFEA. The ERD’s only statutory authority in enforcing the WFEA is to decide claims between employers and employees. That is why the ERD isn’t an agency comparable to the EEOC for purposes of agency rights provisions. If an employee agrees to waive his discrimination claim against an employer or to have it decided in another forum, such as arbitration, there’s no secondary authority of the ERD that requires protection.

That’s what Ionetz did when he signed the Menards agreement. LIRC found that the particular agency rights clause in the Menards agreement didn’t protect his right to file a claim with the ERD. The waiver of the right to file a discrimination claim with the ERD didn’t intrude on the ERD’s investigative or enforcement authority, was consistent with the structure of the WFEA, was enforceable, and wasn’t a violation of either law or public policy. LIRC affirmed the dismissal of Ionetz’s complaint, finding it had to be pursued in another forum under the arbitration agreement. Ionetz v. Menard, Inc., ERD Case No. CR201700593 (LIRC, 3/13/2018).

Bottom Line

Waivers of the right to file claims with governmental agencies or to have claims decided in another forum are ultimately matters of contract. You and your employees can agree to whatever you want, as long as your contract doesn’t impose obligations on the ERD that are inconsistent with the authority granted to it under the WFEA. A valid arbitration provision in an employment agreement or a waiver of claims in a severance or separation agreement bars prosecution of WFEA claims before the ERD.

For more information about "Labor and Industry Review Commission Takes on Arbitration Provisions," contact Leslie A. Sammon at lsammon@axley.com or 608.283.6798.