IOWA CITY, Iowa — Iowa's civil rights agency can bring discrimination cases against employers even after the affected workers agreed to handle disputes in arbitration, the Iowa Supreme Court ruled Friday in allowing a sex bias case against Rent-A-Center, Inc., to proceed.
Rent-A-Center, a nationwide chain of rent-to-own stores based in Plano, Texas, had argued the Iowa Civil Rights Commission could not pursue the case because the complaining worker had signed a contract agreeing that all legal claims stemming from her employment would be decided through arbitration. A district judge sided with the company and ordered the enforcement action dismissed.
But in a 7-0 ruling, the Iowa Supreme Court overturned that decision, saying the commission has independent authority under Iowa law to enforce laws barring discrimination and was not a party to the arbitration agreement.
The ruling is considered a victory for workers' rights. The NAACP had filed a friend-of-the-court brief urging the high court to overturn the district judge's decision. If arbitration agreements were allowed to trump state enforcement of anti-discrimination laws, millions of Americans who work for private companies could lose key legal protections against unfair treatment, the group argued.
The case stems from a complaint filed in February 2008 by Nicole Henry, who was an assistant manager at a Rent-A-Center store in Council Bluffs. Henry became pregnant after she was hired in 2007, and gave the company a doctor's note that said she shouldn't lift more than 20 pounds during her pregnancy.
Henry alleges the district manager told her the company typically does not accommodate restrictions "caused by non-work related temporary health conditions," and that she was sent home the next day and told to file for unemployment. The company gave her the choice of being fired or placed on unpaid leave, and she chose the latter. She then filed the complaint with the commission alleging she had been discriminated against because of her pregnancy, even though she had signed the company's arbitration agreement.
The commission filed an administrative complaint alleging discrimination against Rent-A-Center after settlement talks were unsuccessful. The company then sought to suspend the proceedings by arguing the case had to be handled through arbitration.
Friday's ruling will send the case to an administrative law judge to decide the merits of the commission's complaint.
"We are appreciative that the Iowa Supreme Court has resolved this procedural issue that has prevented the case from moving forward on its merits," commission director Beth Townsend said.
Rent-A-Center attorney Rob Friedman said he was disappointed in Friday's decision, arguing it conflicted with a prior U.S. Supreme Court ruling that "prohibits state agencies from adjudicating claims that are subject to a valid arbitration agreement."
He said the underlying claim was based "upon a lawful policy that Rent-A-Center nevertheless changed years ago," and the company now has a broad policy that accommodates pregnant and disabled employees. Rent-A-Center had been close to settling the case long ago, but the deal fell apart after the commission insisted on announcing it in a press release, he said.
"Now instead of resolution and finality, Iowa taxpayers and Rent-A-Center continue to needlessly incur significant resources and expenses," he said.