In a virtual about-face from prior precedent, the United States Supreme Court recently decided that unions may bargain away their members’ right to sue in federal court for violations of federal discrimination statutes. In 1974, the Court held in Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), that a collective bargaining agreement (CBA) requiring arbitration of discrimination claims could not waive a member employee’s right to a judicial forum for statutory discrimination claims. The Court allowed an individual employee to waive this right, however, in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). Thus, until now, the rule derived from Gardner-Denver and Gilmer had been that “federal forum rights cannot be waived in union-negotiated CBAs … [but] can be waived in individually executed contracts.” On April 1, 2009, the Supreme Court in 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456 (2009) rejected this rule and held that a collective bargaining agreement, with a clear and unmistakable waiver provision, can require union members to arbitrate claims under the Age Discrimination in Employment Act (“ADEA”).

The Penn Plaza Case

In 14 Penn Plaza, plaintiff-employees were employed as night lobby watchmen for a New York maintenance service and cleaning contractor, Temco Service Industries, Inc. (“Temco”). When Temco engaged a contractor to provide licensed security services, Temco reassigned plaintiffs as night porters and light duty cleaners. Plaintiffs, who were members of the Service Employees International Union, Local 32BJ (“Union”), filed grievances and ultimately requested arbitration under the CBA between Temco and the Union due to these reassignments, which they contended constituted age discrimination. The CBA required union members to submit all claims of employment discrimination – including those based on statutes like the ADEA as well as any non-statutory claims – to binding arbitration under the CBA’s grievance and dispute resolution procedures. The Union, who requested arbitration on behalf of plaintiffs, later withdrew the age discrimination claims from arbitration because it believed it could not legitimately object to the reassignments as discriminatory given that the Union had consented to the hiring of the contractor that led to plaintiffs’ reassignments.

Plaintiffs filed a charge with the Equal Employment Opportunity Commission and received a Notice of Right to Sue letter. Plaintiffs thereafter sued in federal court, alleging that their reassignment violated the ADEA and other local laws. Temco filed a motion to compel arbitration of plaintiffs’ claims based on the mandatory arbitration provision in the CBA. The district court denied the motion because “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 Court of Appeals affirmed, holding that a CBA “could not waive covered workers’ rights to a judicial forum for causes of action created by Congress.”

The Supreme Court reversed, holding that a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law. The Court reasoned that bargaining to require arbitration of employment discrimination claims “is no different” than the many other bargaining decisions made by unions and employers regarding conditions of employment, and further, the ADEA does not preclude arbitration of ADEA claims.

In its analysis, the Court addressed Gardner-Denver, the 35-year-old precedent which appeared squarely at odds with the Court’s holding. The Court determined that Gardner-Denver’s holding was not as expansive as it seemed, given that the CBA in Gardner-Denver did not expressly reference the statutory claims at issue. Thus, per the Court, the limited scope of the CBA required a finding in Gardner-Denver that judicial enforcement of statutory discrimination claims could not be waived (rather than a blanket prohibition against such enforcement). The Court acknowledged that the Gardner-Denver opinion included language that was “highly critical” of the use of arbitration to enforce statutory discrimination rights. However, the Court said that such skepticism, “rested on a misconceived view of arbitration that this Court has since abandoned.” The Court acknowledged that while there was once a judicial “mistrust of the arbitral process,” this has “radical[ly] change[d].” The Court now recognizes that arbitral tribunals “are readily capable” of resolving complex questions of fact and law and such capacity “extends with equal force to discrimination claims brought under the ADEA.”

The Court did not decide the validity of plaintiffs’ claims that the Temco CBA allowed the Union to block arbitration of their ADEA claims (i.e., by allegedly not permitting plaintiffs to continue with arbitration once the Union withdrew the claims) and thus, unlawfully prevented plaintiffs from vindicating their ADEA rights in the arbitral forum.

The Take Away

The decision in 14 Penn Plaza represents a “radical change” in the law – one that could provide a great benefit for unionized employers. Mandatory arbitration provisions can now be negotiated into CBAs to require member employees to arbitrate federal statutory discrimination claims (and thus forgo the usual and expensive rigors of litigating in federal court). Moreover, the decision in 14 Penn Plaza provides the very language to include in such arbitration provisions to ensure that they constitute the necessary “clear and unmistakable” waiver of federal forum rights for statutory claims.

Employers should note that the impact of 14 Penn Plaza may be limited in scenarios where employees allege that their union prevented them from presenting their statutory claims in arbitration and thus denied them access to the only available mechanism for vindicating their federal civil rights. The Court expressly declined deciding the enforceability of a CBA arbitration provision in such circumstances. In such circumstances, some courts may deny enforcement of a CBA’s mandatory arbitration provision and permit the employee(s) access to the courts.