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14 Penn Plaza: Supreme Court Okays Mandatory Arbitration of Discrimination Claims

Introduction

On April 1, 2009, a divided United States Supreme Court decided, in 14 Penn Plaza LLC v. Pyett, that a provision in a collective bargaining agreement (“CBA”) that clearly and unmistakably requires union members to arbitrate age discrimination claims under the federal Age Discrimination in Employment Act (“ADEA”) is enforceable as a matter of law. The decision may have broader applications beyond age discrimination claims and may be a stepping stone to validate provisions requiring arbitration of claims arising under similar federal discrimination statutes, including Title VII of the Civil Rights Act of 1964 (“Title VII”) and the Americans With Disabilities Act (“ADA”). Still, the inclusion of a binding arbitration provision may not be the best choice in every instance or for every employer. Before bargaining, employers should determine whether a binding arbitration provision would be beneficial and, if so, make sure that the precise language deemed enforceable under 14 Penn Plaza is used.

The Conflict Before 14 Penn Plaza

Prior to the Supreme Court’s decision in 14 Penn Plaza, CBAs generally could not require arbitration of employees’ statutory discrimination claims and collectively deprive employees in a bargaining unit of their right to a federal forum. An individual employee, however, not party to a CBA, could voluntarily waive his or her right to a federal forum by signing an employment contract requiring arbitration of statutory discrimination claims. The Supreme Court decided 14 Penn Plaza to resolve this apparent conflict in the law.

14 Penn Plaza – The Facts and the Decision

The CBA between the employees and 14 Penn Plaza required that the employees submit any statutory claims of age discrimination to binding arbitration in accordance with the CBA’s provisions and procedures for grievance resolution. The CBA stated, in relevant part:

There shall be no discrimination against any present or future employee by reason of race, creed, color, age, disability, national origin, sex, union membership, or any other characteristic protected by law, including, but not limited to, claims made pursuant to Title VII of the Civil Rights Act, the American With Disabilities Act, the Age Discrimination in Employment Act, the New York State Human Rights Law, the New York City Human Rights Code, ... or any other similar laws, rules, or regulations. All such claims shall be subject to the grievance and arbitration procedures . . . as the sole and exclusive remedy for violations. Arbitrators shall apply appropriate law in rendering decisions based upon claims of discrimination.

(emphasis provided). As a result of changes in its subcontracting arrangements that rendered certain jobs unnecessary, 14 Penn Plaza reassigned several employees to other less desirable and lower-paid positions. The employees filed grievances under the CBA alleging, among other claims, violations of the ADEA. The union eventually withdrew the ADEA claims, but the employees secured a right-to-sue letter from the EEOC and filed suit in federal court. The district court and court of appeals would not enforce the arbitration provision. On appeal, the United States Supreme Court reversed those decisions.

The Supreme Court concluded that nothing in the ADEA prohibited the arbitration provision in the CBA, which was an enforceable and freely-bargained-for condition of employment. The Court also recognized that arbitration has become in recent years much more of an accepted and appropriate mechanism for the resolution of disputes. To the extent that the provision may subordinate an individual employee’s right to pursue a federal claim to the collective rights of the entire bargaining unit, the Court emphasized that such a result is inherent in the collective bargaining process. If an employee believes that the union inappropriately failed to pursue a discrimination claim on the employee’s behalf, the employee can bring fair representation and/or discrimination claims against the union itself. Accordingly, the Court held that, where a CBA “clearly and unmistakably” requires bargaining unit members to submit ADEA claims to binding arbitration under the CBA’s grievance procedure, the provision is enforceable and the claims must be arbitrated.

Implications of 14 Penn Plaza for Employers

Technically speaking, the Court’s decision in 14 Penn Plaza is limited to claims for age discrimination under the ADEA. The implications of this decision, however, may go much further. The Court once again endorsed the validity and fairness of the arbitration process generally, a position that the Court has taken with some vigor in recent years. Further, because other discrimination statutes such as Title VII and the ADA also do not contain restrictions on the arbitration of claims, 14 Penn Plaza may be expanded to permit arbitration of claims brought under those statutes. Employers as a result may want to include provisions in their CBAs that require binding arbitration of other federal and state employment laws. Employers must be careful, however, to make sure that the arbitration provisions in their CBAs meet the “clear and unmistakable” language requirement of <>14 Penn Plaza (see recommendations below) to ensure that those provisions are enforced.

Implications of 14 Penn Plaza for Unions

Unions now face greater potential liability for breach of the fiduciary duty of fair representation of their employees as a result of the 14 Penn Plaza decision. Because it generally is the union’s responsibility to pursue discrimination claims that are subject to a binding arbitration provision, and because the union has broad discretion in choosing which claims to pursue, a union will be subject to greater potential liability if employees allege that the union should have, but did not, pursue their claims. Further, unions may be subject to a greater threat of discrimination liability if employees whose claims are not prosecuted by the union allege that the union’s choice not to do so was based on factors giving rise to the claim in the first instance.

Recommendations for Employers