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Saturday, April 11, 2009

The U.S. Supreme Court Decision in 14 Penn Plaza LLC v. Pyett Enforces Arbitration For Discrimination Claims Made By Union Members

Now that the U.S. Supreme Court has made a law that prohibits union members from suing in Federal court to resolve discrimination claims, what's next? Will the right to unionize be similarly denied?

The U.S. Supreme Court Says That Union Members Cannot Sue For Discrimination Claims

Opinion analysis by Erica Goldberg


Justice Thomas’s majority opinion held that nothing in either the National Labor Relations Act, (picture above shows President Franklin Delano Roosevelt signing the Act as Secretary of Labor Francis Perkins looks on) which controls collective bargaining agreements made on behalf of union members, or the ADEA forbids unions from mandating arbitration to resolve statutory discrimination claims. The majority touted the importance of allowing parties to bargain contractually for exchanges of rights and responsibilities, and it noted that courts should generally not interfere in this process. According to the majority, “[t]he decision to fashion a [collective bargaining agreement] to require arbitration of employment-discrimination claims is no different from the many other decisions made by parties in designing grievance machinery.”

Justice Thomas then confronted the thorny relevant precedent. Over three decades ago in Alexander v. Gardner-Denver Co., the Court held that unions cannot contractually waive an individual employee’s substantive guarantees against workplace discrimination. More recently, in Gilmer v. Interstate/Johnson Lane Corp., the Court held that individual employees who waive their right to a federal forum on their own behalf may be compelled to arbitrate employment discrimination claims. As a result of these two rulings, the Second Circuit below in 14 Penn Plaza ruled that, while individuals may waive the right to a judicial forum for federal discrimination claims, the same provision in a collective bargaining agreement was unenforceable.

The Court overruled the Second Circuit’s decision by distinguishing Gardner-Denver, which in the majority’s view was narrower than depicted by either the Second Circuit or the dissents. In Gardner-Denver, the Court held that despite a collective bargaining agreement requiring arbitration of all grievances, the employee was entitled to a federal forum to resolve statutory discrimination claims. However, in that case, the collective bargaining agreement contractually prohibited certain types of employment discrimination and compelled arbitration for any disagreement between the company and its employees regarding the meaning and application of the contract. Because the collective bargaining agreement did not explicitly mandate arbitration of statutory discrimination claims, but compelled arbitration of the established contractual guarantees against discrimination, the majority interpreted Gardner-Denver as involving only the doctrine of election of remedies.

Justice Thomas then elaborated upon the language in Gardner-Denver condemning collective bargaining agreements that waive an employee’s federally guaranteed substantive rights. According to Justice Thomas, the substantive right at issue is the right to a workplace free of age discrimination, not the right to litigate the age discrimination claim in a federal forum. The majority explained that earlier decisions deriding the efficacy and fairness of arbitration in resolving federal claims have been since repudiated, and that arbitration is a perfectly acceptable, if not more efficient, forum for addressing grievances related to employment discrimination.

Justice Souter’s dissent, joined by Justices Stevens, Ginsburg, and Breyer, faulted the majority for evading Gardner-Denver by ignoring its much broader holding that federal forum rights cannot be waived in union-negotiated contracts. According to Justice Souter, the fact that the agreement in Gardner-Denver did not explicitly mention statutory claims was only one of many reasons for its holding. “One need only read Gardner-Denver itself to know that it was not at all so narrowly reasoned,” reprimanded Justice Souter. The dissent also noted that, although flawed in its reasoning and approach, the majority opinion may be quite limited because it did not address whether a waiver of a judicial forum is enforceable when the union can block arbitration of employment discrimination claims.

Justice Stevens wrote a separate dissent to stress that, although the Court’s recent decisions have retreated on its former suspicion of arbitration, a Court’s newly embraced policy favoring arbitration cannot substitute for a genuine reading of the statutes and the precedent.

Links and further information

The Question:
Is an arbitration clause contained in a collective bargaining agreement, freely negotiated by a union and an employer, which clearly and unmistakably waives the union members’ right to a judicial forum for their statutory discrimination claims, enforceable?

A provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.

14 Penn Plaza LLC v. Pyett (07-581)
A provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law
Decided April 1, 2009

Full Opinion

Respondents are members of the Service Employees International Union, Local 32BJ (Union). Under the National Labor Relations Act, the Union is the exclusive bargaining representative of employees within the building-services industry in New York City, which includes building cleaners, porters, and doorpersons. The Union has exclusive authority to bargain on behalf of its members over their “rates of pay, wages, hours of employment, or other conditions of employment,” 29 U. S. C. §159(a), and engages in industry-wide collective bargaining with the Realty Advisory Board on Labor Relations, Inc. (RAB), a multiemployer bargaining association for the New York City real-estate industry. The agreement between the Union and the RAB is embodied in their Collective Bargaining Agreement for Contractors and Building Owners (CBA). The CBA requires union members to submit all claims of employment discrimination to binding arbitration under the CBA’s grievance and dispute resolution procedures.

Petitioner 14 Penn Plaza LLC is a member of the RAB. It owns and operates the New York City office building where respondents worked as night lobby watchmen and in other similar capacities. Respondents were directly employed by petitioner Temco Service Industries, Inc. (Temco), a maintenance service and cleaning contractor. After 14 Penn Plaza, with the Union’s consent, engaged a unionized security contractor affiliated with Temco to provide licensed security guards for the building, Temco reassigned respondents to jobs as porters and cleaners. Contending that these reassignments led to a loss in income, other damages, and were otherwise less desirable than their former positions, respondents asked the Union to file grievances alleging, among other things, that petitioners violated the CBA’s ban on workplace discrimination by reassigning respondents on the basis of their age in violation of Age Discrimination in Employment Act of 1967 (ADEA), 29 U. S. C. §621 et seq. The Union requested arbitration under the CBA, but after the initial hearing, withdrew the age-discrimination claims on the ground that its consent to the new security contract precluded it from objecting to respondents’ reassignments as discriminatory. Respondents then filed a complaint with the Equal Employment Opportunity Commission (EEOC) alleging that petitioners had violated their ADEA rights, and the EEOC issued each of them a right-to-sue notice. In the ensuing lawsuit, the District Court denied petitioners’ motion to compel arbitration of respondents’ age discrimination claims. The Second Circuit affirmed, holding that Alexander v. Gardner-Denver Co., 415 U. S. 36 , forbids enforcement of collective-bargaining provisions requiring arbitration of ADEA claims.

Held: A provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.

(a) Examination of the two federal statutes at issue here, the ADEA and the National Labor Relations Act (NLRA), yields a straightforward answer to the question presented. The Union and the RAB, negotiating on behalf of 14 Penn Plaza, collectively bargained in good faith and agreed that employment-related discrimination claims, including ADEA claims, would be resolved in arbitration. This freely negotiated contractual term easily qualifies as a “conditio[n] of employment” subject to mandatory bargaining under the NLRA, 29 U. S. C. §159(a). See, e.g., Litton Financial Printing Div., Litton Business Systems, Inc. v. NLRB, 501 U. S. 190 . 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 employer, and courts generally may not interfere in this bargained-for exchange. See NLRB v. Magnavox Co., 415 U. S. 322 . Thus, the CBA’s arbitration provision must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614 . It does not. This Court has squarely held that the ADEA does not preclude arbitration of claims brought under the statute. See Gilmer v. Interstate/Johnson Lane Corp., 500 U. S. 20 . Pp. 6–10. Accordingly, there is no legal basis for the Court to strike down the arbitration clause in this CBA, which was freely negotiated by the Union and the RAB, and which clearly and unmistakably requires respondents to arbitrate the age-discrimination claims at issue in this appeal. Pp. 6–10.

(b) The CBA’s arbitration provision is also fully enforceable under the Gardner-Denver line of cases. Respondents incorrectly interpret Gardner-Denver and its progeny as holding that an agreement to arbitrate ADEA claims provided for in a collective-bargaining agreement cannot waive an individual employee’s right to a judicial forum under federal antidiscrimination statutes.

(i) The facts underlying Gardner-Denver and its progeny reveal the narrow scope of the legal rule they engendered. Those cases “did not involve the issue of the enforceability of an agreement to arbitrate statutory claims,” but “the quite different issue whether arbitration of contract-based claims precluded subsequent judicial resolution of statutory claims.” Gilmer, supra, at 35. Gardner-Denver does not control the outcome where, as here, the collective-bargaining agreement’s arbitration provision expressly covers both statutory and contractual discrimination claims.

(ii) Apart from their narrow holdings, the Gardner-Denver line of cases included broad dicta highly critical of using arbitration to vindicate statutory antidiscrimination rights. That skepticism, however, rested on a misconceived view of arbitration that this Court has since abandoned. First, contrary to Gardner-Denver’s erroneous assumption, 415 U. S., at 51, the decision to resolve ADEA claims by way of arbitration instead of litigation does not waive the statutory right to be free from workplace age discrimination; it waives only the right to seek relief from a court in the first instance, see, e.g., Gilmer, supra, at 26. Second, Gardner-Denver’s mistaken suggestion that certain informal features of arbitration made it a forum “well suited to the resolution of contractual disputes,” but “a comparatively inappropriate forum for the final resolution of [employment] rights.” 415 U. S., at 56, has been corrected. See, e.g., Shearson/American Express Inc. v. McMahon, 482 U. S. 220 . Third, Gardner-Denver’s concern that, in arbitration, a union may subordinate an individual employee’s interests to the collective interests of all employees in the bargaining unit, 415 U. S., at 58, n. 19, cannot be relied on to introduce a qualification into the ADEA that is not found in its text. Until Congress amends the ADEA to meet the conflict-of-interest concern identified in the Gardner-Denver dicta, there is “no reason to color the lens through which the arbitration clause is read.” Mitsubishi, supra, at 628. In any event, the conflict-of-interest argument amounts to an unsustainable collateral attack on the NLRA, see Emporium Capwell Co. v. Western Addition Community Organization, 420 U. S. 50 , and Congress has accounted for the conflict in several ways: union members may bring a duty of fair representation claim against the union; a union can be subjected to direct liability under the ADEA if it discriminates on the basis of age; and union members may also file age-discrimination claims with the EEOC and the National Labor Relations Board.

(c) Because respondents’ arguments that the CBA does not clearly and unmistakably require them to arbitrate their ADEA claims were not raised in the lower courts, they have been forfeited. Moreover, although a substantive waiver of federally protected civil rights will not be upheld, see, e.g., Mitsubishi, supra, at 637, and n. 19, this Court is not positioned to resolve in the first instance respondents’ claim that the CBA allows the Union to prevent them from effectively vindicating their federal statutory rights in the arbitral forum, given that this question would require resolution of contested factual allegations, was not fully briefed here or below, and is not fairly encompassed within the question presented. Resolution now would be particularly inappropriate in light of the Court’s hesitation to invalidate arbitration agreements based on speculation. See, e.g., Green Tree Financial Corp.-Ala. v. Randolph, 531 U. S. 79 .Pp. 23–25.

498 F. 3d 88, reversed and remanded.

Thomas, J., delivered the opinion of the Court, in which Roberts, C. J., and Scalia, Kennedy, and Alito, JJ., joined. Stevens, J., filed a dissenting opinion. Souter, J., filed a dissenting opinion, in which Stevens, Ginsburg, and Breyer, JJ., joined.

Case below: Pyett v. Pennsylvania Building Company (2nd Cir 08/01/2007)
Official docket sheet
Certiorari granted: February 19, 2008.
Oral argument: December 1, 2008. Transcript The Solicitor General will participate in oral argument as amicus curiae supporting Respondents.

Question presented:

Is an arbitration clause contained in a collective bargaining agreement, freely negotiated by a union and an employer, which clearly and unmistakably waives the union members’ right to a judicial forum for their statutory discrimination claims, enforceable?

Certiorari Documents:

* Petition for Writ of Certiorari
* Brief of respondents in opposition
* Reply of petitioners

Briefs on the merits:

* Brief for Petitioner 14 Penn Plaza, LLC., and Temco Service Industries, Inc.
* Brief for Respondent Steven Pyett, Thomas O'Connell, and Michael Phillips
* Reply Brief for Petitioner 14 Penn Plaza, LLC., and Temco Service Industries, Inc.
* Brief for the Equal Employment Advisory Council in Support of Petitioner
* Brief for the National Academy of Arbitrators in Support of Respondent
* Brief for the Service Employees International Union, Local 32BJ in Support of Respondent
* Brief for the National Right to Work Legal Defense Foundation, Inc., in Support of Respondent
* Brief for the American Federation of Labor and Congress of Industrial Organizations and Change to Win in Support of Respondent
* Brief for the Lawyers’ Committee for Civil Rights Under Law, the American Association of People with Disabilities, the Asian American Justice Center, Legal Momentum, the Mexican American Legal Defense and Educational Fund, the National Partnership for Women & Families, and the National Women’s Law Center, in Support of Respondent
* Brief for the National Employment Lawyers Association, AARP, and American Association for Justice in Support of Respondent
* Brief for the United States as amicus curiae Supporting Respondents
* Brief of the Chamber of Commerce of the United States as Amicus Curiae in Support of Petitioners

Additional analysis:

* Cornell University Law School


* For Petitioners: Paul Salvatore; Proskauer Rose LLP; 1585 Broadway; New York, NY 10036; (212) 969-3000.
* For Respondent: Jeffrey L. Kreisberg; Kreisberg & Maitland LLP; 116 John Street, Suite 1120; New York, NY 10038; (212) 629-4970.

US - Oral argument on whether CBA waives employee's right to sue for violation of anti-discrimination statutes.

14 Penn Plaza LLC v. Pyett (oral argument 12/01/2008)
Decision below: Pyett v. Pennsylvania Building Company (2nd Cir 08/01/2007):
Details, briefs:

When employees sued claiming age discrimination, the employer filed a motion to compel them to take the case to arbitration. The employees were covered by a collective bargaining agreement which prohibited age discrimination and also said "All such claims shall be subject to the grievance and arbitration procedure [in the collective bargaining agreement] as the sole and exclusive remedy for violations." The trial court denied the motion to compel arbitration, and the 2nd Circuit affirmed.

The 2nd Circuit held that "arbitration provisions contained in a [collective bargaining agreement], which purport to waive employees' rights to a federal forum with respect to statutory claims, are unenforceable." The US Supreme Court is reviewing the 2nd Circuit judgment.

Glossary of Terms Commonly Used in Labor and Employment