Supreme Court Rules That Unionized Employees Can Be Required To Arbitrate Age Discrimination Claims

In a victory for employers whose Collective Bargaining Agreements (“CBA”) contain express provisions mandating the arbitration of federal discrimination claims, the United States Supreme Court recently held that a CBA provision that clearly and unmistakably requires union members to arbitrate claims arising under the Age Discrimination and Employment Act of 1967 (“ADEA”) is enforceable under federal law.

Factual Background

In 14 Penn Plaza LLC v. Steven Pyett et. al., No. 07-581 (April 1, 2009), the CBA at issue required union members to submit all claims of employment discrimination to binding arbitration under the CBA’s grievance and dispute resolution procedures.  Specifically, the CBA provided that discrimination based on various enumerated federal and state laws, including the ADEA, was prohibited and that “All such claims shall be subject to the grievance procedures [contained in the CBA] as the sole and exclusive remedy for violations.”

Three workers covered by the CBA had been employed as night lobby watchmen in an office building.  After the office building’s owner engaged another security services contractor to provide licensed security guards to staff the lobby and entrances of its building, the three employees were reassigned to jobs as night porters and light duty cleaners in other locations in the building.  The employees claimed that these reassignments led to loss in income, caused them emotional distress, and were otherwise less desirable than their former positions and violated the ADEA.  As a result, the employer and union arbitrated the employees’ claims.

The Lower Courts Deny The Employer’s Motions to Compel Arbitration

During arbitration, the union withdrew the age discrimination claims.  The employees subsequently sued in federal court, alleging that their reassignment violated the ADEA and state and local laws prohibiting age discrimination.  The employer filed a motion to compel arbitration under the Federal Arbitration Act.  The United States District Court for the Southern District of New York denied the motion, stating that under Second Circuit precedent, “even a clear and unmistakable union-negotiated waiver of a right to litigate certain federal and state statutory claims in a judicial forum is unenforceable.” 
The Court of Appeals affirmed the District Court’s ruling, holding that it could not compel arbitration of the dispute given the U.S. Supreme Court’s 1974 decision in Alexander v. Gardner Denver Co., 415 U.S. 36 (1974).  The Court of Appeals stated that Gardner-Denver held “that a collective bargaining agreement could not waive covered workers’ rights to a judicial forum for causes of action created by Congress….”  Pyett v. Pennsylvania Bldg. Co., 498 F.3d 88, 92 (2d Cir. 2007).

The Supreme Court Reverses

In a 5-4 decision, the Supreme Court reversed, rejecting the employees’ argument that the arbitration clause is outside the permissible scope of the collective bargaining process because it affects the employees’ “individual, non-economic statutory rights.”  Instead, the Court stated that the arbitration provision was part of a bargained-for exchange that courts may not interfere with.  “As a result, the CBA’s arbitration provision must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep…It does not.”
The Court concluded that because the NLRA provided the union and employer with statutory authority to collectively bargain for arbitration of workplace discrimination claims, and because Congress did not terminate that authority under the ADEA, there would be no reason for the Court to strike down the CBA’s arbitration clause, “which was freely negotiated by the Union and [employer], and which clearly and unmistakably requires respondents to arbitrate the age discrimination claims at issue in this appeal.”
 
Going forward, employers who would rather arbitrate claims arising under federal discrimination law over having to defend such claims before the EEOC or in court should seek to negotiate arbitration provisions in the CBA providing that arbitration is the exclusive remedy for such claims.  Moreover, CBA arbitration provisions should be drafted carefully, explicitly stating that all discrimination claims shall be subject to arbitration as the sole and exclusive remedy for such violations, and should enumerate all relevant anti-discrimination statutes subject to arbitration, including the ADEA and Title VII.