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Rent-A-Center, Inc. v. Iowa Civil Rights Com'n

Supreme Court of Iowa

February 28, 2014

RENT-A-CENTER, INC., Appellee,

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Thomas J. Miller, Attorney General, and Katie A. Hlavka Fiala, Assistant Attorney General, for appellant.

Edward F. Berbarie and Robert F. Friedman of Littler Mendelson, P.C., Dallas, Texas, Mary L. Harokopus and Andrew M. Trusevich, Plano, Texas, Frank B. Harty and Debra L. Hulett of Nyemaster Goode P.C., Des Moines, for appellee.

Russell E. Lovell II, Des Moines, and David S. Walker, Windsor Heights, for amicus curiae National Association for the Advancement of Colored People.


In this case, we must decide whether the Iowa Civil Rights Commission (ICRC) can pursue an enforcement action under the Iowa Civil Rights Act against an employer when the complaining employee signed an agreement with the employer to arbitrate all employment-related claims. The ICRC accepted the administrative law judge's finding that the agreement did not limit the ICRC's rights because the ICRC was not a party to the agreement. On judicial review, the district court disagreed. It found the Federal Arbitration Act (FAA) preempted state law and remanded the matter to the ICRC with instructions to dismiss the matter pending arbitration by the parties. The ICRC appealed.

Because the ICRC was not a party to the agreement and its interest is not derivative of the employee's, we find the agreement does not limit its ability to bring claims against the employer. Iowa law authorizing ICRC enforcement is thus not preempted by the FAA. Accordingly, we reverse the district court's order and remand the case with instructions to affirm the commission's order.

I. Facts and Procedural History.

Nicole Henry began working for Rent-A-Center, Inc. (RAC) in Council Bluffs in approximately April 2007. On June 19, 2007, as a condition of her continued employment, Henry signed a Mutual Agreement to Arbitrate Claims (Arbitration Agreement) with RAC. The Arbitration Agreement stated that Henry agreed to arbitrate " all claims for violation of any federal, state or other governmental law, statute, regulation or ordinance" arising out of or related to her employment with RAC that " would have been justiciable under applicable state or federal law." It further stated that neither party would

initiate or prosecute any lawsuit or adjudicative administrative action (other than an administrative charge of discrimination to the Equal Employment Opportunity Commission or an administrative charge within the jurisdiction of the National Labor Relations Board) in any way arising out of or related to any claim covered by [the] Agreement.

The Arbitration Agreement also said that nothing in it would " be construed to relieve any party of the duty to exhaust administrative remedies by filing a charge or complaint with an administrative agency and obtaining a right to sue notice, where otherwise required by law."

After her employment began, Henry became pregnant. On November 15, Henry provided RAC with a note from her doctor that imposed a twenty-pound lifting restriction on her for the duration of her pregnancy. Henry alleges the district manager told her " the company usually

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does not accommodate restrictions or limitations caused by non-work related temporary health conditions, and that [she] should go apply for unemployment immediately." The next day, according to Henry, she " was sent home because the corporate office made the final decision not to accommodate [her], yet the company has been accommodating a pregnant store manager." As an assistant manager, Henry contends she had performed many duties on a daily basis that did not require heavy lifting.

Henry alleges that after she was sent home, the company gave her a choice between unpaid leave and termination. She chose unpaid leave. On February 4, 2008, Henry filed a complaint with the ICRC, alleging RAC had discriminated against her because of her pregnancy. The ICRC cross-filed Henry's complaint with the Federal Equal Employment Opportunity Commission (EEOC) under a workshare agreement between the EEOC and the ICRC.

After attempts to resolve the complaint were unsuccessful, the ICRC filed a statement of charges with the Iowa Department of Inspections and Appeals (DIA) on December 17, 2010. The statement charged RAC with violations of Iowa Code sections 216.6(1) and 216.6(2)( d ) " based upon its requiring Nicole Henry to take a leave of absence from her employment upon her presenting a doctor's note that she had a pregnancy-related disability." See Iowa Code § 216.6(1), (2)(d) (2007). Henry's complaint to the ICRC was attached to and expressly incorporated in the statement of charges. In the caption on the statement, Henry's name appeared as the complainant above that of the ICRC.

Once the statement of charges was filed, Henry could no longer obtain a release from the ICRC to commence her own action against RAC in district court. See Iowa Code § 216.16(3)( a )(3) (2011) (stating the ICRC shall not issue a release for the right to commence an action after notice of hearing has been served on a respondent). Henry did not attempt to intervene in the administrative proceeding against RAC. See Iowa Admin. Code r. 161-4.26(1) (allowing an individual to file a motion to intervene in a contested case).

On February 8, 2011, RAC filed a motion to dismiss the ICRC's charges, or in the alternative, compel arbitration. Attached to the motion was an authenticated copy of the Arbitration Agreement.

The DIA's administrative law judge (ALJ) issued a decision on April 19, denying RAC's motion to dismiss or compel arbitration on the ground that the ICRC was not a party to the Arbitration Agreement and therefore not bound by it.

RAC appealed the ALJ's order to the ICRC on April 25 and requested a stay of proceedings. On August 31, however, the ICRC upheld the ALJ's decision. It reasoned: (1) the ICRC was not a party to the Arbitration Agreement, (2) the ICRC could lawfully initiate proceedings on behalf of persons in Iowa when it believed discrimination had occurred, (3) the remedial actions available to the ICRC are not available to the arbitrator and are important to protect RAC's Iowa workers from discriminatory practices, (4) an arbitrator does not have the same public interest to end discrimination that the ICRC has, and (5) Henry could not waive the enforcement rights statutorily vested in the ICRC.

On September 30, RAC filed a petition in district court for judicial review of the ICRC's order. See Iowa Code § 17A.19 (providing for judicial review of agency action). RAC's petition alleged that the Arbitration Agreement and the FAA required that the ICRC's charges be adjudicated

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by an arbitrator. See 9 U.S.C. §§ 1-16 (2012).

After hearing oral arguments from the parties, the district court issued a ruling on March 5, 2013, granting RAC's requested relief. The court found the FAA preempted state law granting jurisdiction to the ICRC over Henry's complaint. In the decision, the court acknowledged a prior United States Supreme Court decision which held the FAA did not bar the EEOC from seeking victim-specific relief in an administrative proceeding for the benefit of a complainant who had signed an arbitration agreement with his employer. See E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002). Yet the district court found that decision did not apply to a state agency such as the ICRC. The district court therefore remanded the matter to the ICRC with instructions to dismiss the proceeding until Henry and RAC had arbitrated their dispute.

The ICRC appealed. We retained the case.

II. Standard of Review.

This case involves questions of legal interpretation. If an agency has not been clearly vested with discretion to interpret a law, we do not give deference to the agency's interpretation and will substitute our own judgment if we conclude the agency made an error of law. See Iowa Code § 17A. 19(10)( c ); Renda v. Iowa Civil Rights Comm'n, 784 N.W.2d 8, 14-15 (Iowa 2010).

The ICRC concedes neither it nor the DIA have been clearly vested with the authority to interpret the relevant provisions of the Iowa Civil Rights Act or federal law, such as the FAA. Therefore, we shall give no deference to the ICRC's or the DIA's legal interpretations in this case.

III. Analysis.

The present controversy involves whether the FAA and the Arbitration Agreement bar the ICRC from bringing nonarbitration claims against RAC relating to Henry's employment. RAC argues, and the district court agreed, that the ICRC could not assert claims outside arbitration that Henry had agreed to arbitrate. RAC contends the terms of the FAA-protected Arbitration Agreement would be nullified if the ICRC and the DIA could adjudicate these claims, rather than having them decided by an arbitrator. In RAC's view, the FAA preempts any state law that would grant authority for the ICRC to bring nonarbitration claims against RAC that relate to matters covered by the Henry-RAC Arbitration Agreement.

The ICRC, on the other hand, denies that it is bringing an action on behalf of Henry. Rather, it maintains it has brought an independent public enforcement action. Because it was not a party to the Arbitration Agreement, the ICRC insists it cannot be bound to arbitrate claims against RAC.

We turn first to the ICRC's function and its claims against RAC.

A. The ICRC.

The ICRC is entrusted by the legislature with interpreting, administering, and enforcing the Iowa Civil Rights Act, which was designed " ‘ to eliminate unfair and discriminatory practices in public accommodations (and) employment.’ " Estabrook v. Iowa Civil Rights Comm'n, 283 N.W.2d 306, 308 (Iowa 1979) (quoting 1965 Iowa Acts ch. 121 (preface)); see also Iowa Code § 216.5 (outlining the powers and duties of the ICRC). The Act is intended to " correct a broad pattern of behavior rather than merely affording a procedure to settle a specific dispute." Renda, 784 N.W.2d at 19 (internal quotation marks omitted).

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Among the powers and duties of the ICRC set forth in Iowa Code section 216.5 are the following:

2. To receive, investigate, mediate, and finally determine the merits of complaints alleging unfair ...

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