In 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456 (2009), the United States Supreme Court enforced a mandatory arbitration provision contained in a collective bargaining agreement (“CBA”) that, by its terms, extended to claims of discrimination. Writing for the majority, Justice Clarence Thomas focused on the importance of enforcing bargained-for exchanges and narrowly interpreted precedential case law.
Prior to the Court’s 5-4 ruling on April 1, 2009, lower courts were left to reconcile two seemingly conflicting Supreme Court decisions. Previously, it had been generally accepted that the Supreme Court’s decision in Alexander v. Gardner-Denver, 415 U.S. 36 (1974), rendered unenforceable provisions of CBAs that compelled arbitration of individuals’ claims for alleged violations of federal statutory rights. In Gilmer v. Interstate/ Johnson Lane Corp., 500 U.S. 20 (1991), the Supreme Court broadly supported arbitration in general and arbitration of employment disputes in particular, finding that the Age Discrimination in Employment Act (the “ADEA”) did not preclude arbitration of claims brought under the statute. The Gilmer Court ruled that an individually negotiated agreement to arbitrate age discrimination claims must be enforced, as long as its terms are “clear and unmistakable.” Nonetheless, Gilmer left undisturbed the decision in Gardner-Denver.
The plaintiffs in 14 Penn Plaza sought to litigate in court claims that their employer had discriminated against them in violation of the ADEA. Relying on a provision in the CBA with the employees’ union, the employer contended that the employees’ claims were subject to mandatory arbitration. Finding that Gardner-Denver precluded enforcement of the arbitration provision against the individual employees, the lower courts rejected arbitration of the plaintiffs’ claims.
While Gardner-Denver had been widely understood to bar union waiver of employees’ rights to bring claims in court rather than arbitration, Justice Thomas rejected such a broad reading of that case in analyzing the arbitrability of the plaintiffs’ ADEA claims. Rather, the Court explained that the ruling in Gardner-Denver was narrow, finding merely that the arbitration provision in the CBA at issue there compelled arbitration of all disagreements regarding the meaning of the CBA but did not, by its terms, extend to statutory claims of discrimination. The Court also noted that Gardner-Denver reflected judicial distrust of arbitration that has long since been abandoned in favor of broad support of the freedom of parties to agree to resolve claims through arbitration. Because the CBA in 14 Penn Plaza explicitly mandated the arbitration of statutory discrimination claims, Gardner-Denver did not control the Court’s decision.
The Court also held that “[n]othing 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.” The National Labor Relations Act gave unions, as bargaining agents for their members, the power to agree to binding arbitration; nothing in the ADEA superseded that authority.
The Court did not determine whether under a CBA a union could prevent employees from individually arbitrating discrimination claims that the union was not willing to pursue on behalf of the employee. In such a case, the employee might well not be barred from litigating her claims notwithstanding the existence in the CBA of an arbitration provision.
The 14 Penn Plaza decision is a victory for those who believe that arbitration is a cost- and time-efficient method for resolving disputes. While employers who prefer arbitration to litigation are certainly pleased with the outcome, arbitration also benefits employees by allowing them to seek redress without incurring costly or delayed litigation.