On April 1, 2009, in the 5-4 decision 14 Penn Plaza LLC v. Pyett, the United States Supreme Court held that a provision in a collective-bargaining agreement requiring union members to arbitrate age discrimination claims is enforceable. The plaintiffs, former unionized watchpersons at a New York City office building, filed a lawsuit against their employer under the Age Discrimination in Employment Act ("ADEA") alleging that they were reassigned to less desirable positions based on their age. The employer tried to block the ADEA claims based on the collective-bargaining agreement with the employees' union which expressly stated that ADEA claims were subject to binding arbitration. The district court and the Second Circuit Court of Appeals denied the employer's motion to compel arbitration, relying on the 1974 Alexander v. Gardner-Denver Co. decision in which the Supreme Court held that an arbitration clause in a collective-bargaining agreement did not preclude an employee's right to sue his employer for race discrimination under Title VII because the agreement did not expressly cover statutory claims.

The employer appealed to the Supreme Court which reversed the lower court. Writing for the five-justice majority, Justice Thomas reasoned that the National Labor Relations Act gave the union the authority to agree to binding arbitration of age discrimination claims. The Court found nothing in the ADEA that superseded that authority and noted that the Court's prior decisions have "required only that an agreement to arbitrate statutory antidiscrimination claims be 'explicitly stated' in the collective-bargaining agreement." In reaching its decision, the Court retreated from language in Gardner-Denver Co., which was highly critical of using arbitration to vindicate statutory employment rights and noted that the narrow holding of the case did not prevent employers and unions from agreeing to arbitrate employment discrimination claims.

Writing for the four dissenting justices, Justice Souter disagreed with the ruling and emphasized that the decision goes against 35 years of established precedent recognizing two categories of rights in labor and employment law: those rights relating to employees' collective activity, which may be exercised or relinquished by the union during collective-bargaining, and those rights relating to an individual employee's equal employment opportunities, which the union may not waive. Justice Stevens, writing separately in dissent, further questioned the Court's "changed view of the merits of arbitration" without any intervening change in the relevant statutory provisions by Congress. Rather than offering a panacea to employers, the Supreme Court's decision in Pyett may not have much of a practical effect because, as Justice Souter noted in his dissent, the decision "reserves the question whether a [collective-bargaining agreement's] waiver of a judicial forum is enforceable when the union controls access to and presentation of employees' claims in arbitration, which is usually the case." Thus, the decision fails to address whether an individual employee would still have the right to bring a statutory claim in court despite an arbitration provision in the collective-bargaining agreement if the union chooses not to pursue the employee's claim through arbitration. Despite its practical limitations, however, the case signals the Supreme Court's favorable view of arbitration to resolve employment disputes. It further underscores the importance for employers who negotiate and draft collective-bargaining agreements to ensure that arbitration provisions are explicit, unmistakable and clear, and that the provisions specifically identify the statutory claims that fall within the ambit of arbitration.

Finally, while the decision in Pyett may create an opportunity for unionized employers to arbitrate statutory employment-related discrimination claims, it should be noted that Congress introduced the Arbitration Fairness Act of 2009 in February. If it becomes law, the Arbitration Fairness Act will amend the Federal Arbitration Act and will prohibit certain pre-dispute arbitration agreements, including agreements that cover employment and civil rights claims. However, the Arbitration Fairness Act currently provides that it does not apply to collective-bargaining agreements and, therefore, would not affect the holding in Pyett. It remains to be seen whether the Supreme Court's decision in Pyett accelerates Congress' attention to passing the Arbitration Fairness Act, and whether Congress will respond to Pyett by amending the Arbitration Fairness Act to legislatively overturn that decision.