Supreme Court Upholds Enforcement of Union Contract Provisions Requiring Arbitration of Age Discrimination Claims
May 28, 2009
Mark E. Baker- Northern Virginia
In an important decision resolving a split among the United States Courts of Appeals, the United States Supreme Court recently ruled that a collective bargaining agreement’s clear and unmistakable requirement that employees submit statutory age discrimination claims to arbitration is enforceable. The ruling in 14 Penn Plaza LLC, et al. v. Pyett et al. (S. Ct. Docket No. 07-581) is consistent with a 1991 Supreme Court decision (Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)) holding that an individual agreement to arbitrate age discrimination claims is enforceable under the federal Age Discrimination in Employment Act (ADEA). Together, Penn Plaza and Gilmer reflect the Court’s clear and continuing receptivity to private agreements – whether individually or collectively bargained – that clearly and unmistakably call for the arbitration of statutory discrimination claims.
Background
In Penn Plaza, a group of employees who were subject to a collective bargaining agreement (CBA) between Service Employees International Union, Local 32BJ (the union) and their employer were moved to lower-paying and less desirable jobs when their employer reorganized its night watchmen and security activities at a building in New York City. The union filed a grievance on the employees’ behalf alleging that the employer’s action violated the ADEA and various provisions of the CBA. After an initial arbitration hearing, however, the union withdrew the ADEA claim because it had agreed to the employer’s new security arrangement.
When the employees subsequently sued the employer for violations of the ADEA in the U.S. District Court for the Southern District of New York, the employer filed a motion to compel arbitration of the ADEA claims. The district court denied the motion on the grounds that “even a clear and unmistakable union-negotiated waiver of a right to litigate certain federal and state statutory claims in a judicial forum is unenforceable.” The United States Court of Appeals for the Second Circuit affirmed.
The Penn Plaza Decision
Writing for a five-member majority, Justice Clarence Thomas first noted that the CBA at issue required covered employees “to submit all claims of employment discrimination to binding arbitration under the CBA’s grievance and dispute resolution procedures.” Indeed, the pertinent CBA provision specifically prohibited discrimination on the basis of “age” and various other statutorily prohibited grounds, and it specifically referred to “the Age Discrimination in Employment Act.” After noting the importance of arbitration in collective bargaining relationships under the National Labor Relations Act (NLRA), the Court noted that this “decision to fashion a CBA to require arbitration of employment-discrimination claims is no different from many other decisions made by parties in designing grievance machinery.” Consequently, “the CBA’s arbitration provision must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep.”
Citing the prior Gilmer decision, Justice Thomas flatly concluded that the ADEA “does not” preclude arbitration of claims brought under the statute. There is no legal distinction between arbitration agreements signed by an individual employee and those agreed to by a union representative. As long as the requirement that employees arbitrate statutory discrimination claims is “explicitly stated” in the CBA, that agreement to arbitrate is enforceable. Summarizing the interplay between the ADEA and federal labor law, the Court stated that, because the union and employer had “statutory authority to collectively bargain for arbitration of workplace discrimination claims, and Congress did not terminate that authority with respect to federal age-discrimination claims in the ADEA,” there was “no legal basis for the Court to strike down the arbitration clause in this CBA...”
The Court then explained how this decision could be squared with Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), which had held that an arbitration decision upholding an employee’s termination for “just cause” did not preclude the employee from subsequently pursuing a claim that his termination constituted unlawful race discrimination under Title VII of the Civil Rights Act of 1964. Justice Thomas stressed that the CBA arbitration provision at issue in Gardner-Denver “did not cover statutory claims” and “did not mandate arbitration of statutory antidiscrimination claims.” Likewise, later Supreme Court decisions that had relied on Gardner-Denver to find that other types of statutory claims were not subject to mandatory arbitration under a CBA had involved arbitration provisions that did not expressly refer to the statutory claims at issue. In other words, Gardner-Denver and its progeny had not involved “clear and unmistakable” agreements to arbitrate statutory claims as did the Penn Plaza arbitration agreement.
Practical Impact
The Penn Plaza decision makes it easier for employers to compel arbitration of statutory age and other discrimination claims by CBA-covered employees, where the CBA terms clearly and unmistakably state that such claims are subject to binding arbitration. The arbitration provision at issue in Penn Plaza very specifically referred to a prohibition on age and other forms of discrimination and to the ADEA and various other federal and state anti-discrimination statutes, and expressly required arbitration of such statutory discrimination claims. The Court’s decision clearly turned on those “clear and unmistakable” references.
Employers should carefully consider whether to seek to include a requirement that employees arbitrate statutory discrimination claims in their collective bargaining agreements. Although arbitration can reduce the risks associated with lawsuits and jury trials, there are downsides as well. If such claims must be arbitrated under the CBA, the union will generally be obligated to represent the employee. The availability of union representation may cause employees to assert discrimination claims they might otherwise forego. Also, it can be difficult to get claims dismissed before hearing in arbitration – a distinct possibility in court – and arbitrators are generally used to applying more employee-friendly standards to discipline and discharge challenges in arbitration.
Employers who seek to argue that discrimination claims by their unionized employees ought to be decided through their CBA grievance/arbitration processes should carefully examine their CBA terms to determine if the requisite “clear and unmistakable” requirement to arbitrate statutory discrimination is present. Employers who wish to require arbitration of statutory discrimination claims should use the Penn Plaza CBA language as a guidepost to seek to obtain appropriate revisions in their next round of union negotiations. We recommend that employers obtain counsel regarding the pros and cons of mandatory arbitration of employment discrimination claims before doing so.
For more information, contact:
Mark E. Baker
703.720.8088
mark.baker@hklaw.com
toll free: 1.888.688.8500
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