Arbitration proceedings generally provide a speedier and less costly means of resolving employment-related claims than a lawsuit, but employees cannot be forced to arbitrate unless they have agreed to bring their claims before an arbitrator. In unionized settings, employers have often argued that an arbitration provision in a collective bargaining agreement with a union precluded individual employees from by-passing the arbitration process and asserting statute-based claims (including those for employment discrimination) in court, but these arguments have traditionally met with little success, due mainly to a 1974 Supreme Court decision that was widely regarded as preserving the right of unionized employees to bring their statutory discrimination claims in court. On April 1, 2009, however, the U.S. Supreme Court issued a decision in 14 Penn Plaza LLC v. Pyett that swings the pendulum in favor of employers on this issue.

The Supreme Court’s Decision in 14 Penn Plaza LLC v. Pyett

In 14 Penn Plaza, several reassigned employees filed a lawsuit against their employer under the Age Discrimination in Employment Act (“ADEA”) alleging that their reassignments had been unlawfully based on age. The employees had previously filed grievances over their reassignments pursuant to the grievance and arbitration provision of the collective bargaining agreement that applied to them, but their union dropped the age discrimination claims before the grievances went to arbitration. The employer attempted to have the ADEA lawsuit stopped, arguing that the employees’ claims had to be arbitrated under the collective bargaining agreement. Although the arbitration provision in the collective bargaining agreement expressly stated that it applied to claims under the ADEA, both the district court and the Court of Appeals for the Second Circuit denied the employer’s request to compel arbitration of the employees’ claims. Relying on the Supreme Court’s 1974 decision in Alexander v. Gardner-Denver Co., the Court of Appeals said that it could not compel the employees to arbitrate their claims because “a collective bargaining agreement could not waive covered workers’ rights to a judicial forum for causes of action created by Congress.” The employer then took the case to the U.S. Supreme Court to determine “whether a provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate claims arising under the Age Discrimination in Employment Act is enforceable.”

To resolve this issue, the Court examined the two statutes involved in the case - the National Labor Relations Act and the ADEA. Under the National Labor Relations Act, an employer and a union representing the employer’s employees have a duty to bargain over conditions of employment, and the Court ruled that mandatory arbitration of employment disputes, including those relating to employment discrimination prohibited by a statute, is a condition of employment under the National Labor Relations Act. Thus, the Court held that unless the discrimination statute in question provides otherwise, an employer and a union can agree to arbitrate statutory discrimination claims. With regard to the ADEA, the Court found that nothing in that statute or its legislative history explicitly precluded arbitration or suggested that collectively bargained arbitration agreements should be treated any differently than an arbitration agreement between an employer and an individual employee (which the Supreme Court had previously approved in a 1991 decision).

The Court concluded that because the employer and union had authority to agree to arbitrate statutory discrimination claims pursuant to the National Labor Relations Act and because nothing in the ADEA takes away that authority, there was no legal basis to strike down the arbitration provision in the collective bargaining agreement at issue in 14 Penn Plaza. Indeed, the Court noted that it “has required only that an agreement to arbitrate statutory antidiscrimination claims be ‘explicitly stated’ in the collective-bargaining agreement.” Accordingly, in a five-to-four decision, the Court held that "a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law."

In addition to finding that statutory discrimination claims may be subject to mandatory arbitration under a collective bargaining agreement, the Court addressed many of the misconceptions about arbitration that had stemmed from its 1974 Gardner-Denver Co. decision. First, the Court clarified that an agreement to arbitrate ADEA claims is not a waiver of any substantive right that the ADEA gives, but is merely an agreement regarding the forum in which such rights will be addressed. Second, the Court stated that the narrow holding in Gardner-Denver Co. (which involved a collectively bargained arbitration provision that made no reference to statutory claims) did not stop employers and unions from agreeing to arbitrate employment discrimination claims. Third, the Court noted that the Gardner-Denver Co. decision’s language indicating a mistrust of the arbitration process is no longer the position of the Supreme Court and should not be given any weight by lower courts.

Practical Implications

Although the 14 Penn Plaza LLC case arises in the ADEA context, its holding will likely be applied in cases involving other discrimination statutes. Thus, unless an employment discrimination law specifically prohibits, or has been interpreted as prohibiting, the mandatory arbitration of claims arising under that law, courts will probably find that a collective bargaining agreement expressly mandating the arbitration of such claims is enforceable. Because the language of 14 Penn Plaza LLC emphasizes that agreements to arbitrate employment discrimination claims must be explicit, unmistakable, and clear, employers negotiating and drafting collective bargaining agreements covering their unionized employees should ensure that any mandatory arbitration provision included in the agreements specifically identifies those employment statutes to which it applies.