In 14 Penn Plaza LLC v. Pyett, (— S.Ct —, U.S., April 1, 2009), the United States Supreme Court considered the question of “whether a provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate claims arising under the Age Discrimination in Employment Act of 1967 (ADEA) . . . is enforceable.” The Supreme Court held that such a provision is enforceable as a matter of federal law.
The Service Employees International Union, Local 32BJ (“Union”) “is the exclusive bargaining representative of employees within the building-services industry in New York City, which includes cleaners, porters, and doorpersons.” Union has exclusive authority to bargain over issues involving wages, hours, and other conditions of employment. The Realty Advisory Board on Labor Relations, Inc. (“RAB”) is a “multi-employer bargaining association for the New York City real-estate industry.” Union and RAB entered into a collective-bargaining agreement (“CBA”), which requires “union members to submit all claims of employment discrimination to binding arbitration under the CBA’s grievance and dispute resolution procedures.”
Union members who worked as night lobby watchmen and in other similar capacities at 14 Penn Plaza LLC (“Employees”) were directly employed by Temco Service Industries, Inc. (“Temco”). In August 2003, 14 Penn Plaza, with Union’s consent, engaged a unionized security services contractor to staff its lobby and entrances. This move rendered Employees’ lobby services unnecessary so Temco reassigned Employees to work as night porters and cleaners. Employees claim that as a result of the reassignments they lost income and suffered emotional distress.
At Employees’ request, Union filed grievances to challenge the reassignments. Union claimed that the reassignments violated the ban on workplace discrimination under the CBA by reassigning Employees based on their age. Union also claimed that the reassignments violated seniority rules and resulted in a failure to equitably rotate overtime. After it failed to obtain relief under the grievance procedure, Union requested arbitration. However, after the initial arbitration hearing, Union withdrew the age-discrimination claims from arbitration. Union believed that because is had consented to the contract for the new security personnel it could not legitimately object to the reassignments.
Affected Employees then filed a complaint with the Equal Employment Opportunity Commission (“EEOC”). The EEOC dismissed the complaint but notified Employees of their right to sue. Employees filed a lawsuit in federal district court. 14 Penn Plaza filed a motion to compel arbitration, which the district court denied. The Court of Appeals for the Second Circuit affirmed the order and held that it could not compel arbitration of the dispute under the holding of Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974).
Supreme Court Decision
The United States Supreme Court held “that a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.” Accordingly, the Supreme Court reversed the decision of the Court of Appeals and remanded the matter for further proceedings.
The National Labor Relations Act (“NLRA”) governs federal labor-relations law.
Unions, which enjoy broad authority to negotiate and administer collective bargaining agreements, also have “the responsibility and duty of fair representation.” An employer has a duty under the NLRA to bargain in good faith with its employees’ representative on the issues of wages, hours, and conditions of employment. Here, the Union and RAB, which negotiated on behalf of 14 Penn Plaza, “collectively bargained in good faith and agreed that employment-related discrimination claims, including claims brought under the ADEA, would be resolved in arbitration.” This term, which was freely negotiated “easily qualifies as a ‘conditio[n] of employment’ that is subject to mandatory bargaining under” the NLRA. The Court found that “[t]he decision to fashion a CBA to require arbitration of employment–discrimination claims is no different from many other decisions made by parties in designing grievance machinery.”
Employees contended that arbitration of discrimination claims “is outside the permissible scope of the collective-bargaining process because it affects the ‘employees individual, non-economic statutory rights.’” The Supreme Court disagreed. “As in any contractual negotiation a union may agree to the inclusion of an arbitration provision in a collective-bargaining agreement in return for other concessions from the employees.” Generally, courts do not interfere with such “bargained–for exchange.”
The arbitration provision in a CBA “must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep.” The Court found that this particular CBA provision does not. The Supreme Court has previously held that the ADEA does not preclude arbitration claims brought under the act. The Court found that this interpretation applies in the collective-bargaining context. “Nothing in the law suggests a distinction between the status of arbitration agreements signed by an individual employee and those agreed to by a union representative.” An agreement to arbitrate statutory antidiscrimination claims must be “explicitly stated” in a CBA. The CBA here does just that. Also, the agreement to arbitrate ADEA claims does not amount to a waiver of a substantive right under the ADEA.
The Court concluded RAB and Union had the authority under the NLRA “to collectively bargain for arbitration of workplace discrimination claims, and Congress did not terminate that authority with respect to federal age-discrimination claims in the ADEA.” The Court found no legal basis to strike down the CBA’s arbitration clause because it “was freely negotiated by the Union and the RAB,” and “clearly and unmistakably requires [Employees] to arbitrate the age discrimination claims at issue in this appeal.”
The Court further found that the arbitration provision is fully enforceable under the Gardner-Denver line of cases. The Gardner-Denver line of cases did not involve the enforceability of an agreement to arbitrate statutory claims but instead explored the issue of “whether arbitration of contract-based claims precluded subsequent judicial resolution of statutory claims.” The Court found that “Gardner-Denver and its progeny thus do not control the outcome where, as is the case here, the collective-bargaining agreement’s arbitration provision expressly covers both statutory and contractual discrimination claims.”
The Court also addressed the criticism of arbitration found in the Gardner-Denver line of cases. The Court found that the Gardner-Denver Court (1) “erroneously assumed that an agreement to submit statutory discrimination claims to arbitration was tantamount to a waiver of those rights;” and (2) “mistakenly suggested that certain features of arbitration made it a forum” that is inappropriate “for the final resolution of rights created by Title VII.” The Gardner-Denver Court also questioned “the union’s exclusive control over the manner and extent to which an individual grievance is presented.” The Supreme Court found that “Congress has provided remedies for the situation where a labor union is less than vigorous in defense of its members’ claims of discrimination under the ADEA.”
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