What Happened

The U.S. Supreme Court held on April 1, 2009, that a collective bargaining agreement's (CBA) arbitration clause that specifically references an employment law is enforceable and will allow the employer to compel arbitration of that claim. In 14 Penn Plaza LLC v. Pyett, the Court ruled that a company could compel arbitration under the Federal Arbitration Act (FAA) of Age Discrimination in Employment Act (ADEA) claims that discharged employees brought against the company in federal court. The Court rejected the employees' argument that ADEA claims are not subject to a CBA's arbitration clause.

The case involved a CBA that contained an arbitration clause that specifically referenced Title VII of the Civil Rights Act, the Americans with Disabilities Act, the ADEA, the New York State Human Rights Law, and the New York City Human Rights Code. The clause stated, "All such claims shall be subject to the grievance and arbitration procedures . . . as the sole and exclusive remedy for violations."

The employees in this case alleged that their employer reassigned them to less desirable positions because of their age. While the union initially filed a grievance on their behalf concerning seniority, overtime, and ADEA claims, it withdrew the grievance concerning the ADEA claims, at which time the employees filed charges with the Equal Employment Opportunity Commission (EEOC). The employees received their right-to-sue letters, and they filed suit in federal court. The company moved to compel arbitration on the claims under the FAA and the CBA's arbitration clause. The federal district court and court of appeals both ruled that the arbitration clause was not enforceable. The Supreme Court reversed and remanded the case.

Why It Matters

The Court's ruling is an important clarification of what claims may be subject to arbitration under a CBA. It also resolves a split in authority among several federal circuit courts. The Supreme Court's prior decisions held that where a CBA's arbitration clause only purported to cover contractual issues, a company could not compel the arbitration of a statutory employment discrimination claim. The Court previously held that Title VII claims in particular could not be waived through the collective bargaining process. These prior decisions also implied that a union could not waive an individual employee's right to a federal forum for such claims.

This decision is important for employers, as it significantly expands the scope of claims subject to an arbitration clause in a CBA and provides greater certainty to the parties of the effect of such agreements when they are negotiated during collective bargaining. While Pyett specifically addressed only the arbitration of ADEA claims, its logic should apply to the other employment discrimination laws such as Title VII and the ADA.

What Employers Should Do Now

The Pyett decision provides clear guidance on how to draft an enforceable arbitration clause in a CBA:

  1. Expressly reference by name the statutes that it intends to encompass; and
  2. State that such claims shall be subject to arbitration as the sole and exclusive remedy for their violation.

In the future both employers and unions negotiating CBAs will no doubt focus more attention on arbitration clauses with this knowledge. Employers with union workforces who prefer arbitration to litigation should push for broad arbitration clauses specifically referencing all applicable laws as their enforceability is much more likely in the wake of Pyett.