On April 1, 2009, the Supreme Court of the United States overturned the long-existing general understanding of its earlier precedent that collective bargaining agreements could not force individual union members to submit their statutory civil rights claims to binding arbitration.
In 14 Penn Plaza LLC, et al. v. Pyett et al, slip op. No. 07-581 (U.S., Apr. 1, 2009), a sharply divided Supreme Court held 5-4 that a collective bargaining agreement clause that specifically required union members to arbitrate their federal Age Discrimination in Employment Act claims is enforceable as a matter of federal law. The Court based its holding largely on a notion undergirding its prior support of binding arbitration: that an employee loses nothing of substance merely because his or her discrimination claim would be heard in arbitration rather than in court.
This decision is good news for employers, many of which prefer to have employment claims decided by an arbitrator rather than by a jury. Unless Congress enacts legislation that is pending again this session that would limit mandatory arbitration of employment discrimination claims, the law now holds that both individual workers and workers represented by a union can, by agreement, waive their right to a judicial forum and a jury for any civil rights-based employment claims.
14 Penn Plaza focused on an age discrimination claim brought collectively by a group of union members who had been employed as night watchmen. They alleged that they had been discriminated against when their employer reassigned them to jobs as porters and light duty cleaners after engaging a subcontractor to provide guards who purportedly were younger as a group.
The union filed an unsuccessful grievance on their behalf, and thereafter sought binding arbitration under the collective bargaining agreement. However, because the union had consented to the employer's engagement of the security company, the union felt unable to pursue the discrimination claim and voluntarily withdrew that portion of the grievance.
The workers then filed their age discrimination claim, first with the EEOC and then in federal court after obtaining "right to sue" letters. The employer moved to dismiss based upon the binding arbitration clause in the bargaining agreement, but both the District Court and the Second Circuit Court of Appeals rejected the employer's argument. Both courts relied on the prevailing general understanding of Supreme Court precedent – that unions could not bargain away an employee's right to a judicial forum, and a jury, when bringing claims arising under federal anti-discrimination statutes.
However, the narrow majority of the Supreme Court agreed with the employer. First, the majority noted that the arbitration clause in the collective bargaining agreement was clear and unambiguous in mandating binding arbitration. That clause directed that binding arbitration was the exclusive means of adjudicating any discrimination claims based upon race, creed, color, age, disability, national origin, sex or other protected characteristic – and specifically identified the federal and state anti-discrimination statutes implicated.
The majority then narrowed the permissible interpretation of its prior decisions which the District Court and Court of Appeals had relied upon by explaining that, in each of the cases previously understood to bar waiver by a union of its members' right to a judicial forum, the arbitration clauses at issue had framed their anti-discrimination provision as a "contractual" right to be free from discrimination -- rather than as a "statutory" right. Because the clause at issue in 14 Penn Plaza explicitly referenced the specific statutory rights, the majority reasoned that the prior case law did not apply.
The majority further explained that its previous discussion and reasoning on the issue was not only just dicta (non-binding legal commentary) but was also based on an assumption, which this majority deemed erroneous, that arbitration was less appropriate for adjudication of civil rights claims than were the courts. The majority reasoned that a waiver of a right to a jury decision was not a waiver of the substantive right to be free from discrimination, and is in fact not a waiver of any substantive right at all.
Finally, although the earlier decisions of the Court had relied in part on the Court's prior focus on the conflict between a union's obligations to the collective body of workers and Congressional concern for individual rights expressed in the federal anti-discrimination statutes, the majority was not alarmed. It found that any such conflict was adequately addressed by the National Labor Relations Act, which provides individual workers with the right to sue the union for failing to fairly represent an individual member in either its collective bargaining negotiations or in its grievance or other representational activities. Indeed, the majority stated that: "[i]t was Congress' verdict that the benefits of organized labor outweigh the sacrifice of individual liberty that this [collective bargaining] system necessarily demands."
Thus, the law is now clear that employment contracts, whether bargained for by individual employees or by unions in a collective bargaining agreement, can include an enforceable requirement that employees submit any claims of discrimination to binding arbitration. Such mandatory arbitration clauses will be enforced if they specifically give notice of the anti-discrimination statutes for which they provide the exclusive mode of seeking relief.
Employers are cautioned, however, to be mindful that the Arbitration Fairness Act of 2009 was reintroduced in the House of Representatives in February of this year. That Act, if passed in its present form, would amend the Federal Arbitration Act to invalidate all contractual mandatory arbitration clauses involving employment, consumer or civil rights issues. Given the current make up of Congress, the ruling in 14 Penn Plaza may only increase the likelihood that the Arbitration Fairness Act will become law. If so, the practical long-term impact of 14 Penn Plaza may be very limited indeed.
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