On April 1, 2009, the U.S. Supreme Court upheld in 14 Penn Plaza LLC v. Pyett a collective-bargaining provision that requires arbitration of age-discrimination claims, ruling that labor unions can waive their members’ right to litigate such claims in court. Although this case involves age-discrimination claims only, it may potentially support agreements to arbitrate other employment claims as well. Of course, Congress can, and may, quickly act to amend employment discrimination statutes to prohibit such agreements and reverse the effect of the Court’s ruling in Penn Plaza. Until then, however, employers with collective-bargaining agreements should consider the benefits of arbitration and negotiate for arbitration as the sole and exclusive remedy for discrimination claims.

14 Penn Plaza LLC v. Pyett

Penn Plaza involves a collective bargaining agreement (the “CBA”) between a multiemployer bargaining association for the New York City real-estate industry and the Services Employees International Union (the “Union”), the exclusive bargaining representative of employees working within this industry, such as building cleaners, porters, and doorpersons. The CBA requires Union members to submit all claims of employment discrimination under federal, state, and local anti-discrimination laws to binding arbitration, as the sole and exclusive remedy for such violations.

In this case, the building owner, who is a member of the multiemployer bargaining association party to the CBA, hired a new contractor, after which it reassigned certain employees, who worked as night lobby watchmen, to different duties in the building. The employees urged the Union to file grievances on their behalf against the building owner and the contractor (collectively, their “employers”), alleging that the employers discriminated against them on the basis of age when the employers reassigned their duties, in violation of the Age Discrimination in Employment Act of 1967 (“ADEA”).

Although the Union initially submitted the employees’ ADEA claims to arbitration pursuant to the CBA’s arbitration clause, it withdrew those claims. The employees then filed a complaint with the Equal Employment Opportunity Commission (the “EEOC”) and subsequently filed this lawsuit in federal court after the EEOC issued right-to-sue notices. The employers filed a motion to compel arbitration, which the District Court denied, and which the Second Circuit affirmed, holding that a collective-bargaining provision that requires arbitration of ADEA claims is unenforceable.

The U.S. Supreme Court disagreed and held that a collective-bargaining provision that clearly and unmistakably requires union members to arbitrate ADEA claims, such as the CBA at issue in this case, is enforceable as a matter of federal law. The Court found that the parties had collectively bargained in good faith and agreed that employment-related discrimination claims, including ADEA claims, would be resolved in arbitration. Unless the ADEA itself prohibits arbitration of ADEA claims, the CBA must be honored, the Court held; until then, there is no legal basis for the Court to strike down the arbitration clause.

Application to Other Claims

The Penn Plaza decision only addresses the enforceability of an agreement to arbitrate discrimination claims that fall under the ADEA. Accordingly, it remains to be seen whether discrimination claims on the basis of other protected characteristics, such as race, gender, religion, or national origin, or whether claims under the Family Medical Leave Act, the Americans with Disabilities Act, or similar employment statutes, can also be subject to arbitration. In ruling that a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable, the Court relied on the text of the ADEA, which fails to preclude the arbitration of ADEA claims. Therefore, Penn Plaza may reasonably be extended to agreements to arbitrate claims under other employment laws as well, so long as the express language of those laws likewise fails to prohibit arbitration.

Is Penn Plaza Here to Stay?

Whether Penn Plaza applies to agreements to arbitrate other employment claims may be a moot point if Congress acts quickly. Throughout the opinion, the Court clearly indicates that Congress is free to amend any employment statute to prohibit arbitration of claims under the particular law. This would not be the first time that Congress acted to reverse a U.S. Supreme Court decision. As we recently saw after the Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), Congress swiftly acted to pass the Lilly Ledbetter Fair Pay Act. That new Act amended the Civil Rights Act of 1964 to expressly provide that each paycheck that a worker receives restarts the worker’s time deadline for filing wage discrimination claims, thereby reversing the Court’s decision in Ledbetter, which had held that the discriminatory pay decision, and not each paycheck, starts the 180-day clock. If Congress picks up on the Court’s cues in Penn Plaza, it may quickly act to amend the ADEA, and other employment laws, to expressly prohibit arbitration of claims under those laws, in order to preserve individuals’ right to bring their claims in court.

Post-Penn Plaza Advice to Employers

The Penn Plaza decision is encouraging to employers, as the advantages to arbitrating discrimination claims as the sole and exclusive remedy are plenty. For example:

  • Arbitration is less costly than going to court;
  • Arbitration is quicker than a court proceeding;
  • Arbitration avoids a trial by jury, which could involve foregoing the letter of the law and simply second-guessing an employer’s legitimate personnel decisions;
  • Arbitration involves the sharing of information between the parties in a much more sensible, controlled way, avoiding the significant burdens and expenses of full-blown discovery in court;
  • Arbitration decisions are usually “final and binding” on all of the parties, avoiding further costs and delays of appeals; and
  • Arbitration as the sole and exclusive remedy avoids the necessity of having to litigate discrimination claims in multiple forums – which could include arbitration, agency proceedings, and court proceedings – and which would require the employer to win at each forum.

Accordingly, assuming Penn Plaza is here to stay, employers with collective-bargaining agreements would be wise to review and, where appropriate, attempt to negotiate changes in their agreements to “clearly and unmistakably” make discrimination claims subject to the agreements’ grievance and arbitration procedures as the “sole and exclusive” remedy for such claims.