Earlier this month, the United States Supreme Court issued a decision in a case that employees, unions, and employers had been watching closely. In the case of 14 Penn Plaza LLC v. Pyett, the Supreme Court held in a 5-4 vote that a collective bargaining agreement (CBA) that “clearly and unmistakably” requires union members to arbitrate claims brought under the Age Discrimination in Employment Act (ADEA) is enforceable as a matter of federal law.
The Supreme Court’s decision arose from a lawsuit brought by a group of former security guards in a New York City office building. The security guards were members of a service employees union, which acted as the exclusive bargaining representative for employees within the buildingservices industry in New York City. The CBA between the union and the security guards’ employer— a building services contractor—required union members to submit all claims of employment discrimination to binding arbitration.
The dispute arose when 14 Penn Plaza LLC, the owner and operator of the office building in which the employees worked, switched to a different security contractor to provide security services. The union, which also represented the new contractor’s employees, consented to the switch. As a result, the former security guards were reassigned to other jobs as porters and cleaners. The former guards asked their union to file a grievance alleging that their employer reassigned them on the basis of age, in violation of the ADEA. The union requested arbitration under the CBA, but withdrew the age-discrimination claims, believing that its consent to 14 Penn Plaza’s new security contract precluded the union from contending that the reassignments of the former guards were discriminatory. The former security guards then sued for age discrimination in federal court. The employer asked the federal court to compel arbitration of the age-discrimination claims, contending that such claims were within the scope of the CBA. The trial court denied the employer’s request and the court of appeals upheld that decision.
The Supreme Court disagreed with the lower courts and held that the age discrimination claims should have gone to arbitration under the terms of the CBA. The Supreme Court made clear a provision in a collective bargaining agreement that “clearly and unmistakably” requires union members to arbitrate ADEA claims is enforceable as a matter of federal law. In reaching this conclusion, the Court debunked the notion that a series of federal cases (starting with the U.S. Supreme Court’s own decision in Alexander v. Gardner-Denver Co. in 1984) somehow rendered arbitration clauses unenforceable when applied to ADEA claims. The Supreme Court found that those cases did not control the outcome of a case such as this where a freely-negotiated CBA contained an arbitration clause that expressly covered all discrimination claims.
The Supreme Court also rejected that line of cases as being based upon the “misconceived view” that arbitration was somehow an inadequate vehicle for vindicating employee rights. The Court first dismissed the view that an agreement to arbitrate discrimination claims was a “prospective waiver” of rights under the ADEA. Far from a “prospective waiver” of rights, which is not permitted under the ADEA, an arbitration clause simply reflects the contracting parties’ selection of the forum in which to resolve disputes concerning those rights.
Second, the Supreme Court tackled head-on the language in Gardner-Denver that questioned an arbitrator’s ability to resolve non-contractual claims. The Supreme Court made clear that it had long since abandoned the “misconception” that the arbitration setting was somehow limited in its ability to handle complex disputes.
Finally, the Supreme Court addressed the concern reflected in Gardner-Denver that union arbitration carries the potential of a conflict of interest when the union has exclusive control over the presentation of an individual employee’s grievance. The concern in that situation is that the union might do what is best for the bargaining unit as a whole rather than for the individual member. The Supreme Court saw no reason why this concern should foreclose arbitration of discrimination claims, observing that the potential conflict should be addressed by Congress in legislation if it were truly a legitimate policy concern. Moreover, the Supreme Court noted that there are legal remedies in the ADEA and the National Labor Relations Act under which the union could be held accountable for subordinating the interests of the individual member to those of the bargaining unit as a whole.
The Supreme Court’s ruling now makes it clear the parties to a CBA (i.e., employers and bargaining units) may freely choose to resolve individual employees’ claims of statutory discrimination in an arbitration forum, which is widely considered to be more expeditious and inexpensive than litigation in court. The ruling may therefore have the effect of reducing the number of discrimination cases brought in the courts by CBA-covered employees who might have otherwise sought to avoid mandatory arbitration of discrimination claims under the Gardner-Denver line of cases. It also remains to be seen if the 14 Penn Plaza ruling will be broadly applied to uphold arbitration clauses in non-CBA employment agreements. Unless and until Congress enacts labor-friendly legislation to overturn or otherwise limit 14 Penn Plaza, employers should feel comfortable knowing they will be able to rely on the arbitration clauses they negotiated in their CBAs.