On April 1, 2009, in a 5-4 decision, the United States Supreme Court clarified an issue of confusion among lower courts when it held that “a collective-bargaining agreement that clearly and unmistakably requires a union member to arbitrate ADEA claims is enforceable as a matter of federal law.”

The case, 14 Penn Plaza, LLC v. Pyett, No. 07-581, 556 U.S. ___ (2009), is a marked departure from established precedent in some jurisdictions and welcome news for employers who often prefer to present their cases to an arbitrator, rather than a jury.

Until 14 Penn Plaza, the Supreme Court’s direction regarding the enforceability of a provision in a collective bargaining agreement that required a union member to arbitrate a statutory discrimination claim was not clear. In an earlier decision discussing whether an employee could be compelled to arbitrate a statutory discrimination claim, Alexander v. Gardner-Denver, 415 U.S. 36 (1974), the Court found that the provision at issue did not expressly require arbitration of a member’s statutory rights, so the employee could not be precluded from bringing statutory claims in a judicial forum.

Later, in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the Court held that an individual’s agreement to arbitrate his ADEA claim was enforceable because the arbitration provision in that agreement clearly and unmistakably included arbitration of statutory claims.

The plaintiffs-employees in 14 Penn Plaza, three of the building’s night watchmen, were members of Local 32BJ of the Service Employees International Union. As members of the union, they were subject to a collective bargaining agreement that expressly made claims under Title VII, the ADEA, and the ADA subject to binding arbitration under the contract’s grievance and dispute resolution procedures.

14 Penn Plaza LLC owned the building where the night watchman worked. In August 2003, the night watchmen’s direct employer, a service and cleaning contractor, engaged another contractor to provide security guards to staff the building lobby and entrances and reassigned the night watchman to jobs as night porters and light-duty cleaners. The union and 14 Penn Plaza agreed to this change.

The union then filed grievances on behalf of the night watchmen contending that the company failed to equitably rotate overtime, that the reassignment violated seniority rules, and that by reassigning them, the building owner violated the contract’s ban on age discrimination. The union requested that the grievances be arbitrated under the contract. After the first hearing, the union withdrew the age discrimination claim from arbitration but continued to arbitrate the remaining claims.

While arbitration on their remaining claims continued, the night watchmen filed a charge of discrimination with the EEOC. After the EEOC issued a dismissal and notice of the right to sue, the night watchmen filed suit alleging that their reassignment violated the ADEA and other state and local laws barring age discrimination.

14 Penn Plaza asked the district court to compel the night watchmen to arbitrate their claims, but the district court denied the motion. The Second Circuit Court of Appeals agreed because under Second Circuit precedent “even a clear and unmistakable union-negotiated waiver of the right to litigate” certain statutory claims is unenforceable.

Writing for the majority at the Supreme Court, Justice Thomas pointed out that fashioning a dispute resolution mechanism to require arbitration of employment-discrimination claims is no different than other decisions made by the parties in designing the grievance process; it is a term or condition of employment that is a mandatory subject of bargaining. “As in any contractual negotiation, a union may agree to the inclusion of an arbitration provision in a collective-bargaining agreement in return for other concessions from the employers. Courts generally may not interfere with this bargained-for exchange.”

The Court further explained that an agreement to arbitrate an ADEA claim is not a waiver of a “substantive right” as that term is used in the ADEA. Although an individual employee must knowingly and voluntarily waive a right or claim under the ADEA, an agreement to arbitrate ADEA claims is not a waiver of a “substantive right” as that term is used in the ADEA. If the waiver provision of the ADEA “included the prospective waiver of the right to bring an ADEA claim in court, even a waiver signed by an individual would be invalid.”

Although the 14 Penn Plaza decision presents employers with an opportunity for quicker and more cost-effective resolution of discrimination claims, it left open the question of what happens when the union withdraws from or refuses to proceed with an individual’s statutory claims. As Justice Souter noted in his dissent, “the majority opinion may have little effect, for 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 employee’s claims in arbitration, . . . which is ‘usually the case.’”