Supreme Court Upholds Collective Bargaining Agreement Provision Requiring Employees to Arbitrate Claims of Age Discrimination

04/02/2009 / Julia H. Halbach

On April 1, 2009, the United States Supreme Court issued its decision in 14 Penn Plaza LLC v. Pyett. In a 5-to-4 decision, the Supreme Court found that a provision in a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate claims of age discrimination is enforceable.

Background: The question of whether an employee can be required to arbitrate claims of discrimination under a collective bargaining agreement has long been disputed by courts in the United States. The Supreme Court previously decided, in Alexander v. Gardner-Denver Co. (1974), that a prior arbitration of a claim under a collective bargaining agreement could not bar a subsequent federal court suit based on claims of discrimination under Title VII. In 1991, the Court held in Gilmer v. Interstate/Johnson Lane Corp. that an employee could sign an individual employment agreement requiring him to arbitrate claims of age discrimination. Finally, the Court foreshadowed its most recent decision in 1998, holding in Wright v. Universal Maritime Service Corp. that an employee covered by a collective bargaining agreement could only waive the right to bring a discrimination claim in court if that waiver was “clear and unmistakable,” but that no showing of a waiver had been made in that case. These rulings set the stage for this case, where the Court decided for the first time that claims arising under a federal employment discrimination statute could be sent to arbitration under the provisions of a collective bargaining agreement where the agreement contained a “clear and unmistakable” provision requiring the arbitration of such claims. The Supreme Court held that such an agreement to arbitrate the statutory claim was enforceable as a matter of federal law.

Facts of Case: The employees in this case, three nighttime guards at a New York City commercial building, were represented by a Union. The collective bargaining agreement negotiated by the Union included a provision that required its employees to submit all claims of discrimination exclusively to an arbitrator. When the building’s owners decided to hire a new security company, the employees in question were reassigned to less-desirable positions. Believing that they had been reassigned to these positions because they were over the age of 40, the employees asked the Union to grieve their reassignment, claiming it was discriminatory under the Age Discrimination in Employment Act (“ADEA”). The Union initially agreed, but later withdrew the ADEA claims. When the employees brought individual claims in federal court, the employer tried to block their cases, claiming that they had agreed to try all disputes before an arbitrator.

The Supreme Court upheld the employer’s position, concluding that the employees had agreed to have all of their disputes, including discrimination disputes, decided by an arbitrator. The Court relied on the fact that arbitration of discrimination claims is clearly a “condition of employment” that can be made part of a collective bargaining agreement. The Court also stated that its previous line of cases holding that such arbitration provisions were unenforceable had been misinterpreted. Finally, the Court stated that problems with the arbitration process in the past had been addressed, and that modern arbitration offers employees the same opportunities as litigation.

What this case means for employers: The Court’s ruling makes clear that a “clear and unmistakable” provision in a collective bargaining agreement requiring employees to arbitrate discrimination claims is now enforceable. This is beneficial to employers because arbitration is often less expensive and time consuming than litigation. As such, employers will advocate, via the collective bargaining process, that such waivers be placed in collective bargaining agreements going forward.

Additionally, employers are likely to continue to explore what other statutory rights might be included in the mandatory arbitration clauses of collective bargaining agreements. While the Court’s ruling in this case only specifically applies to age discrimination claims, it is likely that the holding will be applied to other types of discrimination claims, including race, gender, and disability discrimination claims. This ruling may also apply to claims for wage and hour violations under the Fair Labor Standards Act, and for claims brought under the Family Medical Leave Act.

While this case has important implications for employers, the limitations of the Court’s ruling should be noted. This case does not alter or limit the rights created by the various federal and state discrimination statutes – it simply limits the forum in which claims under these statutes can be brought. Employees can still bring discrimination claims against their employers. Additionally, employers should be very careful in drafting collective bargaining provisions that require arbitration of federal discrimination claims. The Court clearly limited its holding to collective bargaining provisions that are “clear and unmistakable.” A provision that that is not clear and unmistakable is likely to be found invalid.

The attorneys in Larkin Hoffman’s Labor & Employment Group have substantial experience in drafting such provisions and are able to assist with any issues relating to this case, or any other labor or employment questions your company might have.