By Alyssa Yatsko and Tobie Hazard
A sharply divided U.S. Supreme Court recently ruled that provisions of a collective bargaining agreement that clearly and unmistakably require union members to arbitrate age discrimination claims are enforceable as a matter of federal law. While the decision is unlikely to impact many employers, the ruling is the latest in a series of Supreme Court decisions finding arbitration to be a legitimate means of resolving employment disputes. But before for you jump to the conclusion that arbitration is the preferred method for resolving your workplace disputes, consider legislation afoot on Capitol Hill that would ban mandatory arbitration to resolve employment claims.
Stephen Pyett, Michael Phillips and Thomas O’Connell worked as night watchmen at 14 Penn Plaza, a New York City office building owned and operated by 14 Penn Plaza, LLC. The three individuals were also members of the Service Employees International Union (SEIU) and covered by a collective bargaining agreement (CBA) between the SEIU and the Realty Advisory Board, a multi-employer bargaining association in which 14 Penn Plaza was a member. Under the CBA, union members were required to submit all employment claims – and specifically, discrimination claims under the Age Discrimination in Employment Act (ADEA) and other federal and state anti-discrimination statutes – to binding arbitration. The CBA added that arbitration shall be the “sole and exclusive remedy for violations” of federal and state anti-discrimination laws.
In August 2003, 14 Penn Plaza entered into an agreement with a security contractor, whose employees were also members of the SEIU, to provide licensed security guards for the office building. As a result, Pyett, Phillips and O’Connell were reassigned to jobs as porters and cleaners. The three claimed their reassignment cost them a loss of pay and emotional distress.
The SEIU filed grievances on behalf of Pyett, Phillips and O’Connell alleging that the reassignment violated the CBA and discriminated against the three on the basis of their age in violation of the ADEA. The SEIU proceeded to arbitration on the three individual’s wage issues, but withdrew its request to arbitrate the three members’ ADEA age discrimination claims. The watchmen then filed charges of discrimination with the Equal Employment Opportunity Commission, and after receiving their right to sue from the EEOC, they filed a lawsuit against 14 Penn Plaza alleging their reassignment amounted to age discrimination under the ADEA.
Based on the provision in the CBA requiring arbitration of discrimination claims, 14 Penn Plaza moved to dismiss the lawsuit and compel arbitration. The trial court, however, denied the motion, holding that the employees had the right to have their claims heard in court. The Second Circuit Court of Appeal affirmed the trial court’s decision, ruling that under the U.S. Supreme Court’s decision in Alexander v. Gardiner-Denver Co., 415 U.S. 36 (1974), CBAs cannot require union members to arbitrate their statutory discrimination claims.
The Decision
By a narrow 5-4 majority, the Supreme Court reversed the Second Circuit and found that the arbitration provision at issue was enforceable. Writing for the majority, Justice Clarence Thomas began his opinion by stating that an agreement between an employer and union to arbitrate discrimination claims is “no different from the many other decisions made by parties in designing grievance machinery” and is a “condition of employment” subject to mandatory under the National Labor Relations Act. Because a union will agree to the inclusion of an arbitration provision in a CBA in exchange for other concessions from the employer, courts are not free to interfere this bargained-for exchange, and the arbitration provision applicable to age discrimination claims “must be honored unless the ADEA itself removes this particular class of grievances from the [National Labor Relations Act’s] broad sweep.”
According to Thomas, nothing in the language or legislative history of ADEA precludes parties from resolving federal age discrimination claims through arbitration. Indeed, the Supreme Court previously held in its 1991 decision, Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), that where an individual employee and his employer have entered into an agreement to arbitrate all contractual and statutory employment claims, including claims under the ADEA, a court may close the courthouse door to the employee and compel the employee to submit his ADEA claim to arbitration. Because “nothing in the law suggests a distinction between the status of arbitration agreements signed by an individual employee and those agreed to by a union representative,” Thomas concluded that there was no legal basis for failing to enforce a CBA’s arbitration provision, which was freely negotiated by the union and the employer, and which clearly and unmistakably requires union members to arbitrate their age discrimination claims.
Justice Thomas also said that reliance on Gardiner-Denver to find the arbitration provision in this case to be unenforceable is misplaced. Gardiner-Denver involved a CBA that required arbitration of contractual claims but was silent as to whether statutory discrimination claims were also required to be arbitrated. Because the CBA in Gardiner-Denver did not clearly and unmistakably require union members to arbitrate their federal discrimination claims, the Supreme Court in Gardiner-Denver held that compulsory arbitration of union members’ federal discrimination claim was not required. This case, wrote Thomas, differs from Gardiner-Denver insofar as the CBA covering Pyett, Phillips and O’Connell clearly and unmistakably requires them to arbitrate their discrimination claims, including claims under the ADEA.
While not explicitly overruling Gardiner-Denver, Justice Thomas levels several criticisms at the Supreme Court’s 1974 decision. First, Thomas stated the Court in Gardiner-Denver erroneously assumed an agreement to arbitrate statutory discrimination claims was tantamount to a waiver of the employee’s rights under those statutes. “The decision to resolve ADEA claims by way of arbitration instead of litigation does not waive the right to be free from workplace age discrimination,” said Thomas. Rather, an agreement to arbitrate discrimination claims like those under ADEA “waives only the right to seek relief from a court in the first instance.” In other words, employees lose no substantive rights by agreeing to have their discrimination claims submitted to arbitration and simply substitute an arbitral forum for a judicial one.
Thomas also takes issue with Gardiner-Denver’s conclusion that arbitrators are not competent to decide statutory discrimination claims. According to Thomas, this timeworn mistrust of the arbitral process harbored by the Supreme Court in Gardiner-Denver has long since been abandoned by the Court and is out of step with the Court’s more recent cases endorsing arbitration of federal discrimination disputes. “In light of the ‘radical change, over two decades, in the Court’s receptivity to arbitration,’ … reliance on any judicial decision littered with … overt hostility to the enforcement of arbitration agreements would be ill advised,” said Thomas.
Addressing the concern raised in Gardiner-Denver that if arbitration of statutory discrimination claims is allowed under a CBA, unions, who have exclusive control over the presentation of an individual’s grievance. may subordinate the interests of the individual employee to the collective interests of the bargaining unit, Thomas stated that the subordination of individual interests to those of the majority is simply a trade-off that is at the heart of the National Labor Relations Act. Thomas added that individual members are adequately protected if the union fails to pursue their discrimination claims in arbitration, as they have the ability to bring a fair representation lawsuit against the union under such circumstances.
In two dissenting opinions, Justice John Paul Stevens and Justice David H. Souter stated that the issue presented by this case is controlled by Court’s decision in Gardiner-Denver, and accused the majority of “subversion of precedent to the policy favoring arbitration.” However, Justice Souther concludes that the majority opinion is likely to have little effect, because it explicitly reserves the question whether a CBA’s waiver of a judicial forum is enforceable when the union controls access to and presentation of employees’ claims in arbitration, which as Souter notes “is usually the case.” 14 Penn Plaza LLC et al. v. Pyett et al., No. 07-581 (April 1, 2009).
Arbitration under legislative attack
While this case is another example of the Supreme Court’s endorsement of arbitration as a means of resolving employment disputes, the practical impact of the case may be limited. While most CBAs have antidiscrimination provisions, few specifically list federal discrimination statutes as subject to grievance and arbitration procedures and provide that arbitration is the sole and exclusive remedy for violations of such statutes. In order for statutory claims to be arbitrable, an arbitration provision in a CBA must reference the statutes to be covered by the arbitration provision and state clearly and unmistakably that claims under those statutes shall be subject to arbitration. If employers want to require their bargaining unit employees to submit to mandatory arbitration of their statutory employment claims, employers should be prepared to make big concessions to the unions in exchange for this provision in the CBA.
Employers should also be mindful that while the Supreme Court may endorse arbitration to resolve employment disputes, many in Congress do not. In February, Rep. Henry C. Johnson (D-GA) and 36 co-sponsors introduced the Arbitration Fairness Act of 2009 (H.R. 1020). If passed, the bill would, among other things, amend the Federal Arbitration Act to invalidate all pre-dispute arbitration agreements that require the arbitration of employment disputes or any conflict arising under any statute intended to protect civil rights. Some employers may remember that similar legislation was introduced in 2007, but the legislation never left the House floor. However, with the change in the administration, the Act may now have a better chance of passage. At the time of publication, HR 1020 has been referred to the House Committee on the Judiciary.
For more information on arbitration agreements, contact Alyssa Yatsko at (303) 295-8138 or akyatsko@hollandhart.com or Tobie Hazard at (303) 295-8280 or tehazard@hollandhart.com.
This article is posted with permission from Colorado Employment Law Letter, which is published by M. Lee Smith Publishers LLC. For more information, go to www.hrhero.com.
