• Supreme Court Upholds Arbitration Agreements in Union Contracts
  • April 29, 2009
  • Law Firm: Miller & Martin PLLC - Office
  • Last week, in a close 5-4 decision, the United States Supreme Court held that a collective bargaining provision requiring arbitration of employment discrimination claims is valid and must be enforced.  The plaintiffs in 14 Penn Plaza v. Pyett were night lobby watchmen and parties to a collective bargaining agreement ("CBA").  The agreement included a provision that employment discrimination claims would be subject to arbitration.  This arbitration provision was agreed upon during the bargaining process and the union members were given wage increases and other benefits as part of the consideration.  When the plaintiffs were transferred to other positions, they grieved the transfer and asserted age discrimination in violation of the Age Discrimination in Employment Act ("ADEA").  The parties arbitrated the plaintiffs' claim but the union later withdrew from the arbitration.  When the plaintiffs brought a lawsuit in federal court, the employer filed a motion to dismiss or to compel the claims back into arbitration under the terms of the CBA. 

    Court of Appeals Held the Arbitration Provision was Unenforceable
    The enforceability of the arbitration provision ultimately went to the Second Circuit, which held that "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 Second Circuit relied on older Supreme Court rulings to determine that while individual employees could agree to arbitration, a labor union could not collectively bargain for arbitration on behalf of its members.

    Supreme Court Disagrees Relying Upon Good Faith Bargaining

    The Supreme Court disagreed and found that a union could agree to arbitrate employment discrimination claims on behalf of employees.  First, the Court noted that the National Labor Relations Act ("NLRA") gives unions broad discretion to collectively bargain.  In this particular case, the Court noted that the union had bargained in good faith and that the arbitration provision was a "freely negotiated" term that became a "condition of employment" for its members-similar to any other bargained-for term in a CBA.  It was, therefore, not within the Court's discretion to "interfere in this bargained-for exchange."  Second, the Court noted that allowing for arbitration did not contradict the ADEA.  Unless Congress were to amend the ADEA and provide that claims under the statute could not be arbitrated, claims brought under the ADEA could be subject to arbitration.  Third, the Court found that there was no discernable basis for finding that individual ADEA claims could be arbitrated but that ADEA claims subject to a CBA could not.  The arbitration provision was "explicitly stated" in the CBA and, as a result, the individual employee did not have to personally waive its right to proceed in court for the waiver to be "knowing and voluntary" under the ADEA.  Lastly, the Court noted that NLRA imposes a duty of fair representation on labor unions when drafting and grieving collective bargaining provisions.  As such, a member who thinks that the union discriminated against him by not pursuing his ADEA claim would have a claim against the union under the NLRA.

    Employers Should Carefully Negotiate Employment Agreements

    This decision provides credibility and, most importantly, enforceability to arbitration agreements in employment discrimination cases.  As long as an arbitration provision is "explicitly stated" in a collective bargaining agreement, it will be as enforceable as if the individual employee signed it personally.  This decision is encouraging for employers which are interested in expanding their use of arbitration agreements but are concerned about the validity of doing so.  Arbitration can be a cost effective and relatively expeditious means for employers to resolve disputes with employees.