A Brief Introduction To New York City Pension Law By Jeffrey D. Friedlander

Municipal Law, New York Law Journal
Jeffrey D. Friedlander, 03-23-2009
LINK

In our present economic circumstances, stories repeatedly appear in the press decrying alleged pension abuses and the cost of pension benefits provided to New York City retirees. At the same time, public employees argue against any changes to the system designed to provide taxpayers with some relief from what may be an unsustainable burden.

While public pension law must surely be one of the most recondite of legal topics, it is useful at this time to examine the structure of the city's pension system, some of the issues that are being litigated, the role played by the New York City Law Department in the defense and administration of the system and, very importantly, the efforts to recover losses to the pension funds due to corporate fraud.



First, there is no single New York City pension fund; there are five: the New York City Employees' Retirement System (NYCERS), which is the largest of the group, the New York City Police Department Pension Fund, the New York City Fire Department Pension Fund, the New York City Teachers' Retirement System, and the New York City Board of Education Retirement System.1 These funds are each administered by a different board of trustees, with authority shared by public and union representatives. With close to 600,000 active and retired members and assets exceeding $83 billion, the city funds are cumulatively one of the largest public pension systems in the country.2

The second salient feature of the system is that all five pension funds are defined benefit plans. That is, retirees who have made their required member contributions receive a specified amount at retirement, generally based on years of service and salary, as opposed to defined contribution plans, in which benefits generally are based on amounts contributed and the investment earnings on those contributions.



Defined benefit plans have become rare in the private sector, where defined contribution plans are now the norm. In times of fiscal austerity and poor market conditions, a member of a defined benefit pension plan holds a very valuable asset.

The final initial point is that city pension benefits are contractual rights that are protected by the New York state constitution from any diminishment or impairment.3 This means that budget cuts or other cost saving measures can never target existing pension benefits, and the Legislature is barred from amending the pension laws to diminish in any way the benefits of existing members or retirees.

Once a benefit is conferred, it cannot be taken away. Therefore, any consideration of pension reform aimed at reducing pension costs must be directed solely at the benefits of prospective new members of the system.

The Pensions Division of the Law Department, consisting of eight attorneys, represents the city's five pension funds in litigation challenging individual and class-wide benefit determinations, provides legal counseling and advice to the pension funds and city agencies, drafts and provides comments on proposed legislation relating to pensions, assists in the implementation of new laws, and, in conjunction with nine securities litigation firms retained by the Law Department, investigates and represents the city funds in securities fraud cases.

As statutory counsel to the funds, it is the duty and objective of the Law Department to provide advice and counsel to each of the city's pension systems. Pension Division attorneys face the challenge of representing and providing counsel to each of the five different funds, each, as noted, administered by a board of trustees composed of different officials and divided between city and employee representatives.

For example, the Board of Trustees of one of those systems, NYCERS, consists of a representative of the Mayor, the Public Advocate, the Comptroller, each of the borough presidents, and the chief executive officer of three employee labor organizations. Administrative Code §13-103.

In the course of their proceedings, city and employee representatives on the boards may differ on a number of issues, most frequently on the application and interpretation of provisions of the pension laws to individual applications for disability retirement. See Uniformed Firefighters Assn. v. Beekman, 52 N.Y.2d 463 (1981). In this situation, it is the role of the Pensions Division attorneys to provide reasoned and balanced legal advice based on case law, as well as information on the experiences of the pension funds in similar circumstances.

Disability Benefit Litigation

The majority of litigation against the city retirement systems involves challenges brought pursuant to Article 78 of the Civil Practice Law and Rules by individual pension members who have been denied accident disability retirement benefits. For uniformed members, such as police and firefighters, these benefits are very valuable, equaling 75 percent of their salaries, and, but for a small portion, are tax free.

The definition of "accident" in this context is one that has been defined through litigation. The Court of Appeals has defined the term, as used in the pension accident disability statutes, to be a "sudden, fortuitous mischance, unexpected, out of the ordinary, and injurious in impact." Lichtenstein v. Board of Trustees of the Police Pension Fund of the Police Department of the City of New York, Article II, 57 N.Y.2d 1010, 1012 (1982).

In stating that "not every line of duty injury will result in an award of accident disability," the Court of Appeals contrasted "injuries sustained while performing routine duties but not resulting from unexpected events," which are not accidents, with injuries sustained by "precipitating accidental event[s] . . . which [are] not a risk of the work performed," which are accidents. McCambridge v. McGuire, 62 N.Y.2d 563, 567-68 (1984). More recently, the Court has stated that accident disability is properly denied if it is found that the member "was injured while performing his usual duties." Kehoe v. City of New York, 81 N.Y.2d 815 (1993), aff'g 186 A.D.2d 376 (1st Dept. 1992).

Last month, the New York Supreme Court upheld the New York City Fire Department Pension Fund's determination denying accident disability retirement benefits to a firefighter who was injured in a personal altercation with another firefighter.

The incident occurred on New Year's Eve 2003 at a Staten Island firehouse. The petitioner, who along with other firefighters was drinking alcohol while on duty, had an argument with a fellow firefighter that escalated into a physical altercation, culminating in the petitioner being hit over the head with a metal chair. The fact that as a result of the incident, petitioner suffered brain damage and was found to be disabled from performing the duties of a firefighter, did not entitle him to an accident disability pension. The Board of Trustees determined that petitioner was injured by the intentional act of his co-worker, which did not constitute an "accident" supporting the granting of the pension. Walsh v. Scoppetta, Index No. 23889/08 (Sup. Ct. Kings County, Feb. 25, 2009).

While the great majority of accident disability retirees collect their disability retirement benefits for life, that is not always the case. Pursuant to Safeguards on Disability Retirement laws,4 accident disability retirees may be called back to service if a determination is made that the person is no longer disabled from performing his or her job duties.

Recently, attorneys of the Pensions Division prevailed in a lawsuit brought by a former police officer whose accident disability retirement benefits were revoked after he was observed performing roofing work for his own company, and thereafter found by the Medical Board of the New York City Police Pension Fund to be no longer disabled from performing the duties of a police officer. The former officer then failed a pre-screening drug test and was consequently found unqualified for reappointment to the position of police officer or any other city position. Seiferheld v. Kelly, Index. No. 114351/07 (Sup. Ct. N.Y. County, Oct. 23, 2008).

Other Litigated Matters

Although disability benefit litigation constitutes the bulk of pension litigation, other benefit issues are also litigated, including a contest, yet to be finally resolved, by the parents of a firefighter killed at the World Trade Center who are challenging the determination of the City of New York Fire Department Pension Fund to grant their son's fiancée a portion of the death benefits payable by the pension fund, rather than granting the benefits in their entirety to the parents.5

After several interim orders and proceedings before the King's County Supreme Court and the Board of Trustees of the Fire Department Pension Fund, as well as the submission of additional evidence, the court ultimately found in 2008 that questions of fact existed, necessitating a hearing. See Prior v. Board of Trustees of the City of New York Fire Department Pension Fund, Index No. 11979/2006 (Sup. Ct. Kings County, Feb. 27, 2008). The hearing began on April 17, 2008, resumed in May, and after numerous unsuccessful attempts at settlement, was completed on Dec. 10, 2008.

Benefit Class Actions

In addition to litigating claims brought by individual pension members, Pensions Division attorneys defend class actions challenging the method of calculating benefits for entire groups of pension members. Two active state court cases illustrate the complexity of this type of litigation and magnitude of exposure.

In Nager v. The New York City Teachers' Retirement System, Index No. 119294/02 (Sup. Ct. N.Y. County), commenced in August 2002, the plaintiffs allege that the New York City Teachers' Retirement System improperly failed to include "per session" compensation in determining pension benefits for certain retired TRS members. Per session work is work, such as coaching, that is performed in addition to regular teaching responsibilities, and for which teachers receive additional compensation.

Following the certification of a class, the parties agreed to calculate pension adjustments, if any, based on an algorithm, for the class of over 50,000 retirees. While the substance of the agreement is for the most part resolved and expected to be implemented later this year, class counsel continue to seek attorneys' fees (approximately $30 million) based on a percentage of the total amount of pension adjustments expected to be made pursuant to the terms of the settlement. That request was rejected by the trial court and the Appellate Division. See Nager v. The New York City Teachers' Retirement System, 57 A.D.3d 389 (1st Dep't 2008).

In March of 2005, the president of the United Federation of Teachers and three retired teachers filed an Article 78 proceeding and an action seeking an order requiring that the New York City Teachers' Retirement System Board of Trustees correct an alleged miscalculation of the benefit formula applicable to members who retire under the 20 Year Pension Plan. Randi Weingarten v. Board of Trustees of the New York City Teachers' Retirement System, Index No. 103818-05 (Sup. Ct. N.Y. County) and Randi Weingarten v. Board of Trustees of the New York City Teachers' Retirement System, Index No. 103819-05 (Sup. Ct. N.Y. County).

The 20 Year Plan, codified in 1970, provides that members retiring after 20 years of service are entitled to a basic retirement allowance equal to 50 percent of their salary. Administrative Code §13-547. A settlement was reached in 2007, providing for payment of $160 million over a 10-year period, and could affect 30,000 retirees as well as 5,000 active members.

Legislation

The Law Department regularly drafts pension legislation, an activity that calls on the skills and expertise of the Pensions Division.

Pensions Division attorneys are now actively involved in analyzing and drafting pension legislation proposals that would amend certain pension laws prospectively to make pensions less costly to the government over the long term.

For example, legislation that is currently under consideration would increase the length of time it would take employees to vest rights to their pensions, increase employee contributions, and would eliminate overtime in the salary figures used in calculating pensions for certain employees. It is estimated that enactment of these proposals would save the City hundreds of millions of dollars.

Recouping Financial Losses

Particularly timely are the efforts of Pensions Division attorneys, working with outside counsel, to recover losses of the city's pension funds due to corporate fraud.6 In the past two years, the Division has recovered almost $20 million for the funds in connection with securities fraud settlements.

The Private Securities Litigation Reform Act of 1995 requires a court to adopt the rebuttable presumption that "the most adequate plaintiff . . . is the person or group of persons that . . . has the largest financial interest in the relief sought by the class." 15 U.S.C. §78u-4(a)(3)(B)(iii). Accordingly, as one of the largest public pension systems in the country, the combined New York City pension systems frequently have been awarded lead plaintiff status in federal securities fraud class actions.

Most recently, the city's pension funds were awarded lead plaintiff status in two class actions arising out of the sub-prime mortgage debacle. On Nov. 28, 2007, the city's pension funds and the New York State Common Retirement System were appointed lead plaintiffs in litigation against Countrywide Financial Corporation, one of the nation's largest mortgage lenders. The city and state pension systems are both represented by outside counsel Labaton Sucharow.

The lawsuit alleges, among other things, that the defendants made materially false and misleading statements regarding the nature of its lending standards and the quality of its loans; that Countrywide distorted the definitions of the terms "prime" and "sub prime" to mislead investors and the financial community with respect to the nature of its business; and that certain of Countrywide's financial statements were materially misleading in violation of generally accepted accounting principles.

The action further alleges that top management of the company reaped hundreds of millions of dollars in proceeds upon their sale of personally held Countrywide stock while in the possession of material nonpublic information. After disclosure of Countrywide's problems, the company's common stock dropped billions of dollars.

Late last year, the U.S. District Court for the Central District of California issued a favorable decision that largely rejected Countrywide's requests to dismiss the claims, thus allowing the lawsuit to proceed. In re Countrywide Financial Corporation Securities Litigation, Lead Case No. 07-CV-5295 MRP (MANx) (C.D. Cal.).

On Oct. 14, 2008, the city's pension funds were appointed lead plaintiffs in the class action securities litigation commenced against Wachovia Corporation. In this litigation, the city funds are represented by outside counsel Kirby & McInerney.

The complaint alleges that during the class period of May 8, 2006, through Sept. 29, 2008, Wachovia, one the nation's largest financial service providers, serving retail, brokerage and corporate customers, issued materially false and misleading statements regarding its business and financial results, and that as a result, the company's stock traded at artificially inflated prices. Class losses are estimated to be in the tens of billions of dollars.

Specifically, the amended complaint alleges that the company concealed the nature and magnitude of its exposure to sub prime mortgages and debt related to sub prime mortgages; misrepresented that the company maintained very conservative underwriting standards and had very conservative risk management policies and procedures; hid losses from certain risky mortgage products by disclosing them only after the properties had been foreclosed and sold at a loss; failed to disclose its exposure to subprime mortgage-backed securities such as collateralized debt obligations; and overstated its financial results in violation of generally accepted accounting principles by failing to timely write-down sub prime assets and failing to maintain adequate reserves for risky loans. In re Wachovia Equity Securities Litigation, Dkt. No. 08-6171 (RJS) (S.D.N.Y.).

Jeffrey D. Friedlander is first assistant corporation counsel of the City of New York. Inga Van Eysden, chief of the Pensions Division of the Law Department, assisted in the preparation of this article.

Endnotes:

1. See NYC Admin. Code §§13-101, 13-201, 13-301, and 13-501; and BERS Rules and Regulations, adopted pursuant to NY Education Law §2575.

2. See "The Largest Plan Sponsors," Pensions & Investments, Jan. 26, 2009, at 16 (city combined funds ranked as seventh largest retirement plan in the country in terms of assets).

3. Specifically, the Constitution states that "membership in any pension or retirement system of the state or a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired." Art. 4 §7.

4. Administrative Code §13-254 (police officers); §13-171 (NYCERS); §13-356 and §13-357 (Fire); §13-553 (TRS); and §19 of the BERS Rules and Regulations.

5. See Chapter 468 of the Laws of 2002, as amended by Chapter 162 of the Laws of 2003

6. Counsel are chosen from a panel of nine law firms that were selected by the Law Department pursuant to a competitive procurement process.

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



A NEW DAY DAWNING OR DARK CLOUDS ON THE HORIZON? THE POTENTIAL IMPACT OF THE PYETT CASE



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?

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.



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

Syllabus:
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

Counsel:

* 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): http://caselaw.findlaw.com/data2/circs/2nd/063047p.pdf
Details, briefs: http://www.lawmemo.com/supreme/case/Pyett

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

The Broad Foundation Gives $2.5 Million To Two Charter School Networks in NYC

To me, nothing reveals the power of money in New York City under the rule of Mayor Michael Bloomberg more than the turnaround of Eva Moskowitz. For years she, as Chair of the New York City Council Education Committee tortured the New York City Board of Education elite - Joel Klein, Kathleen Grimm, Michelle Cahill, Dennis Walcott, and others - with her aggressive questions about what they were saying and doing. See the picture below, Eva is hard at work attacking the pro-charter stance of the NYC BOE personnel.



Yet at the end of her years at City Council, while in her seat for only a week or two, Eva Moskowitz changed her story. Suddenly, the New York City Board of Education was doing a terrific job of educating New York City public school children.

Immediately after Ms. Moskowitz left the City Council, she became Principal of Harlem Success Aademy, and moved from her apartment up to Harlem to build her charter empire. It's hard to know what she really believes in.

Broad Foundation Awards $2.5 Million in New Grants to Expand Premier Public Charter Schools in New York City

Uncommon Schools and Success Charter Network to triple number of schools in next five years



FOR IMMEDIATE RELEASE
Thursday, April 9, 2009 NEW YORK – Two of New York City's highest-performing nonprofit, public charter school management organizations – Uncommon Schools and the Success Charter Network – will receive a total of $2.5 million to fund schools that provide a high quality public education for thousands more city students, The Eli and Edythe Broad Foundation announced today.

Broad Foundation Founder Eli Broad joined New York City Schools Chancellor Joel Klein, Success Charter Network Founder Eva Moskowitz, and Uncommon Schools Managing Director Brett Peiser to make the announcement after the group toured one of the Success Charter Network schools: Harlem Success Academy 2 on 140th St. and Frederick Douglass Blvd.

“In this day and age, we all need to ensure that our dollars are invested as wisely as possible,” said Eli Broad, founder of The Eli and Edythe Broad Foundation. “And the smartest investment a foundation can make is to replicate the very best public schools in a model city of reform like New York. These charter schools are proving that when public schools extend their school days, offer a challenging curriculum, and customize instruction, their students thrive, and parents demand more.”

The $2.5 million in grants will be distributed as follows:

Uncommon Schools



will receive $1.5 million over three years to support the opening of new schools in Brooklyn, New York, to provide a capital investment for school facilities, and to support home office operations. By 2014, Uncommon Schools will grow to operate 33 schools, 20 of which will be located in New York City.
Success Charter Network will receive $1 million over two years to support its existing four Harlem Success schools and to help open new schools in the New York City area. The network plans to open 40 new schools over the next 10 years.
“Charter schools like Uncommon Schools and Harlem Success Academies not only prepare their students for successful futures, they also prove that every child can learn and that public education can be excellent,” said Chancellor Klein. “With such terrific results, it's no wonder that 30,000 students are on waiting lists for charter schools across the City. I want to thank Eli Broad for this generous contribution, which will allow many more families to send their children to these great schools.”

Schools across the Uncommon network consistently outperform their neighboring district schools and rank among the top schools in their cities and states. For example:

On the 2008 New York State math and English language arts exams, Uncommon Schools' students – 99 percent of whom are Black or Latino – collectively closed the “achievement gap” in grades three through seven, out-performing the state's white students.

In addition, 96 percent of Uncommon's New York City students across four schools scored advanced or proficient on math exams, besting the overall state average by 15 percentage points and the white student average by eight percentage points.
On English language arts exams, 80 percent of Uncommon students scored advanced or proficient, exceeding both the state average the state's white student average.
Based on 2008 New York City Department of Education Progress Reports, Uncommon's Excellence Boys Charter School of Bedford Stuyvesant is the highest-ranked public elementary school in the city.



Across Harlem, where Success Charter Network schools are currently located, only 42 percent of third graders can read, a figure that drops to 31 percent by eighth grade. In contrast, Harlem Success Academy students on average performed at least one year above their grade level in reading in the 2007-2008 school year. That same year, Harlem Success kindergartners on average performed at a second grade level in mathematics.

As a result of the success of the Uncommon and Success Charter Network schools, parental demand for seats has grown steeply in recent years. Last year, some 5,000 students sought admission for just 600 spots in Harlem Success Schools. Today, over 4,000 students sit on wait lists to attend schools across the Uncommon network.

“Uncommon is thrilled to receive this support from The Broad Foundation which will enable us to meet the urgent and growing demand for high-quality public schools in the neighborhoods of Brooklyn,” said Evan Rudall, Uncommon Schools CEO. “This funding will ensure that we can best support our leaders and teachers as they prepare thousands of low-income students to succeed in school and go on to graduate from college.”

Both Uncommon Schools and Success Charter Network schools share operational and instructional elements proven to be successful in preparing low-income students for academic and college success: a highly structured learning environment, a longer school day and a longer school year, standards-based instructional models, and proven curricula that are data-driven and informed by ongoing assessments.

“Our students and their families are extremely grateful for this chance to serve even more of our neighbors, without sacrificing the educational quality that students in Harlem need and deserve,” said Moskowitz. “Every year, thousands more parents in our community want something better for their children. This new support will help us meet that demand.”

Success Charter Network, founded in 2006, is a 501(c)(3) charter management organization that seeks to prepare its students to graduate from college and succeed in life and to tangibly improve educational outcomes for all public school children. Success Charter Network aims to open schools where excellent teachers want to teach and where parents choose to enroll their children and play a greater role in their children's learning and in the larger effort to reform public education. The network's elementary schools provide students in high-need neighborhoods with a broad, rigorous curriculum in order to prevent achievement gaps from arising between low-income children and their more affluent counterparts. In addition to challenging academics such as writing, social studies, geography, arts and inquiry science five days a week, the schools offer crucial developmental activities like chess and play that focus on developing the “whole child.” For more information, please visit www.harlemsuccess.org.

Uncommon Schools is a nonprofit organization that starts and manages outstanding urban charter public schools that close the achievement gap and prepare low-income students to graduate from college. Uncommon builds “uncommonly great schools” by developing and managing regional networks that are philosophically aligned and highly accountable. Based in New York City, the organization has created a home office providing management services that allow school leaders to focus on instructional leadership. Uncommon manages eleven schools in New York City, upstate New York, and Newark, New Jersey and has two associate member schools in Boston, Massachusetts. The organization ultimately will encompass more than 30 schools, serving more than 11,000 K-12 students. Uncommon Schools

The Eli and Edythe Broad Foundation is a national venture philanthropy established by entrepreneur Eli Broad. Born in New York City, Eli Broad has provided nearly $30 million to date to support reform efforts in New York City public schools. Based in Los Angeles, The Broad Foundation's mission is to dramatically improve K-12 urban public education through better governance, management, labor relations and competition. The Broad Foundation

Contacts:

The Broad Foundation Erica Lepping elepping@broadfoundation.org 310-594-6880

Success Charter Network Jeremy Robinson-Leon jeremy@groupgordon.com 978-621-2569

Uncommon Schools Julie Shah jshah@uncommonschools.org 347-287-7812


Education Secretary Arne Duncan on public education

A-101 Chancellor's Regulations on Admissions, Re-admissions, Transfers

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

Is mandatory arbitration the proper forum for resolution of discrimination claims for union members?

Supreme Court limits right of union workers to sue for discrimination
By John Burton, World Socialist Website, 10 April 2009
LINK

In a reactionary, pro-business ruling that reverses decades of settled law, the Supreme Court ruled 5 to 4 last week that workers lose their right to file federal discrimination lawsuits under the 1964 Civil Rights Act whenever a union collective bargaining agreement includes a mandatory arbitration clause.

Mandatory arbitration means that a party agreeable to the company rather than a federal court and jury will decide a dispute, and can do so without making findings of fact or explaining reasons for the decision. There is no right to an appeal, even where the arbitrator disregards the applicable law. Such clauses have become ubiquitous, as businesses insist on compelling arbitration to keep from being hauled in front of juries and forced to defend their actions.

With last week’s Supreme Court decision, it is now the rule that contracts negotiated by union bureaucrats trump federal laws enacted to protect against workplace discrimination.

The plaintiffs in the case, 14 Penn Plaza, LLC v. Pyett, were security guards represented by Service Employees International Union (SEIU) Local 32BJ, which had a collective bargaining agreement with a consortium of New York City commercial landlords. The contract contained a provision to force workers to arbitrate their federal discrimination claims along with alleged violations of the contract itself, such as seniority provisions and work rules.

The SEIU bureaucracy made a deal with a new contractor to replace the plaintiff security guards in the high-rise adjacent to Penn Station with lower-paid workers, which resulted in a grievance claiming violations of federal age discrimination laws as well as seniority rights. At the arbitration hearing, the SEIU withdrew the age discrimination claims because of a “conflict of interest”—namely, that the reassignments were made possible by the union’s own deal with the new contractor.

The transferred security guards then filed age discrimination suits in federal court against the landlords.

The Supreme Court dismissed the security guards’ lawsuit in a decision authored by Associate Justice Clarence Thomas, (pictured at right) joined by the three other members of the extreme right-wing bloc, Chief Justice John Roberts and Associate Justices Samuel Alito and Antonin Scalia. “Swing” Justice Anthony Kennedy, who invariably votes in favor of business interests, provided the crucial fifth vote.

As usual, the right-wing majority proceeded by working backward from its desired political conclusion to fashion its legal reasoning, in the process brushing aside any legal precedent standing in the way.

Thomas brushed aside Alexander v. Gardner Denver Co., which federal courts had been following for 35 years. In that case, a black worker filed a racial discrimination claim after his termination for “just cause” was upheld in a mandatory arbitration. The Supreme Court in 1974 rejected the employer’s argument that the worker could not pursue claims for workplace discrimination in federal court.

Associate Justice Lewis Powell, an appointee of Richard Nixon writing for a unanimous court, explained, “Parties usually choose an arbitrator because they trust his knowledge and judgment concerning the demands and norms of industrial relations. On the other hand, the resolution of statutory or constitutional issues is a primary responsibility of courts, and judicial construction has proved especially necessary with respect to [anti-discrimination laws], whose broad language frequently can be given meaning only by reference to public law concepts.”

This means that certain issues under the contract, such as those concerning seniority, are appropriate for an arbitrator, who is being asked to determine rights under the collective bargaining agreement itself. Disputes involving core civil rights, such as freedom from discrimination in the workplace, however, should be left to judges and juries.

As of last week, that is no longer the law.

Since 1974, American unions have evolved into little more than appendages of the employers. Even 35 years ago, however, the Supreme Court in Alexander recognized that “harmony of interest between the union and the individual employee cannot always be presumed,” and “the union may subordinate the interests of an individual employee” to its own interests.

As did reactionary judges during the first part of the twentieth century when striking down minimum wage and maximum work-hour regulations, Thomas in his decision exalted supposed “arm’s length” contract principles over laws enacted to protect workers’ rights. “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. Courts generally may not interfere in this bargainedfor exchange,” Thomas wrote.

Thomas dismissed Alexander v. Gardner-Denver with the sophistry that the case stood only for the narrow principle that workers could not be forced to give up their right to be protected from discrimination in a collective bargaining agreement. According to Thomas, companies can still insist that workers give up their right to file lawsuits enforcing those rights.

Thomas’s argument flies in the face of the legal axiom that there can be no right without a meaningful remedy.

In a strongly worded dissent, Associate Justice John Paul Stevens, the senior member of the court’s liberal wing, denounced Thomas for his “subversion of precedent.” Associate Justices Ruth Bader Ginsburg, David Souter and Stephen Breyer also dissented.

Labor Management Relations
The Supreme Court Opens the Door to Mandatory Arbitration of Discrimination Claims for Union Members
April 2009
By:
Gavin S. Appleby
Hans Tor Christensen
Jennifer L. Mora

On April 1, 2009, a divided U.S. Supreme Court upheld the ability of an employer and a labor organization, as the employees' exclusive representative for purposes of collective bargaining, to agree that employees can be required to arbitrate their statutory employment discrimination or retaliation claims in accordance with an express requirement to do so under the terms of a bargained-for collective agreement. While the decision in 14 Penn Plaza L.L.C. v. Pyett specifically addressed age discrimination claims arising under a federal statute, the Court's decision is significant in that it now provides an opportunity for employers with unionized workforces to require that union members' discrimination and other statutory employment claims be privately arbitrated, rather than litigated in federal court. To get to that result, however, the relevant provision in the collective bargaining agreement must constitute a clear and unmistakable waiver of the right to pursue such claims in court.

Justice Thomas, writing for the majority, held that where the union and the employer have clearly and unmistakably agreed that statutory employment discrimination claims must be processed through the grievance and arbitration procedure in the parties' collective bargaining agreement, an employee will be required to file a grievance and ultimately submit the claim to a private arbitrator. Further, that employee will in most instances be barred from filing the same claims as a lawsuit in federal or state court.1 While there remain a number of unanswered questions about the 14 Penn Plaza decision, the Supreme Court clearly continues to consider arbitration a legitimate, if not preferred, method of dispute resolution.

Arbitration and Labor-Management Relations

Collective bargaining agreements set forth the terms and conditions of employment for employees in a bargaining unit where the union is the exclusive bargaining representative of those employees. Until the Supreme Court's decision in 14 Penn Plaza, it had been generally accepted that the parties could not include in those terms and conditions of employment a requirement that employees submit statutory claims of employment discrimination under federal or state employment statutes, such as Title VII and the Age Discrimination in Employment Act (ADEA), to the grievance and arbitration provisions in the applicable collective bargaining agreement.

As background, the Supreme Court's 1974 decision in Alexander v. Gardner-Denver Co.,2strongly suggested that both the prospective waiver of statutory employment claims as well as the ability to require arbitration of such claims were prohibited. Gardner-Denver seemed somewhat at odds with the Supreme Court's subsequent decision in Gilmer v. Interstate/Johnson Lane Corp.,3 in which the Court held that "an individual employee who had agreed individually to waive his right to a federal forum could be compelled to arbitrate a federal age discrimination claim." In short, an individual employee was free to agree to compulsory arbitration of age discrimination claims under Gilmer, but a labor organization was apparently prohibited under Gardner-Denver from agreeing in collective bargaining to a similar provision on behalf of the members it represents. It is against this backdrop that the Supreme Court was presented in 14 Penn Plaza with the opportunity to harmonize Gardner-Denver and Gilmer.

Factual Background



The employees at issue in 14 Penn Plaza were members of Local 32BJ of the Service Employees International Union (SEIU), which had the exclusive authority to bargain for and represent those employees regarding "rates of pay, wages, hours of employment, or other conditions of employment." The employer in the case, 14 Penn Plaza L.L.C., owned and operated an office building and was a member of the Realty Advisory Board (RAB), a multi-employer bargaining association. The collective bargaining agreement between the SEIU and RAB required union members to submit their claims for employment discrimination to binding arbitration in accordance with the grievance and arbitration procedures set forth in the applicable collective bargaining agreement. Specifically, the agreement stated:

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 Americans 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.

14 Penn Plaza employed a variety of workers, including night watchmen. After a change in the existing subcontracting arrangement rendered the night watchmen's services unnecessary, the employees were reassigned to jobs as night porters and light-duty cleaners in other locations in the building. The employees claimed that this reassignment resulted in a loss of income and emotional distress.

The SEIU filed grievances on behalf of the employees claiming that the reassignments violated the collective bargaining agreement's prohibition against age discrimination and its seniority rules, and that the employer failed to equitably rotate overtime. Although the grievances ultimately proceeded to arbitration, the SEIU withdrew its claims of age discrimination, but it continued to arbitrate the seniority and overtime claims. In the meantime, the employees filed an administrative charge with the EEOC claiming that the reassignments violated the ADEA. The EEOC ultimately dismissed the employees' charge and provided them with a right-to-sue letter.

The employees then filed a lawsuit in federal district court alleging age discrimination under the ADEA and state law. The employer filed a motion to compel arbitration under the Federal Arbitration Act. However, the federal district court denied the motion and held that under existing precedent in the U.S. Court of Appeals for the Second Circuit, "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 Concludes that Agreements to Arbitrate Contained in Individual Arbitration Agreements and Collective Bargaining Agreements Should Be Treated Differently

The Second Circuit refused to compel arbitration of the employees' ADEA claims based on its belief that the Supreme Court's decision in Gardner-Denver prohibited the parties to a collective bargaining agreement from "waiv[ing] covered workers' rights to a judicial forum for causes of action created by Congress." Although the Second Circuit recognized the tension between the Supreme Court's holding in Gardner-Denver and its more recent decision in Gilmer, the court attempted to reconcile the two decisions. Comparing individual rights to waive claims and arbitration provisions in a collective bargaining agreement, the court concluded that labor agreement provisions "which purport to waive employees' rights to a federal forum with respect to statutory claims, are unenforceable." In short, the Second Circuit considered individual arbitration agreements to be different from the grievance and arbitration provisions set forth in a negotiated collective bargaining agreement.

The Supreme Court Holds that Employees May Be Compelled to Utilize the Grievance and Arbitration Machinery Set Forth in a Collective Bargaining Agreement

The Supreme Court overruled the Second Circuit's analysis. The Court started with the general proposition that an agreement between an employer and a union to submit employment-related discrimination claims to arbitration qualifies as a condition of employment and is "no different from the many other decisions made by the parties in designing grievance machinery." Although the individual employees involved in the case argued that the arbitration clause was outside the permissible scope of collective bargaining because it affected "employees' individual, non-economic statutory rights," the Court rejected this contention. It instead found that the law "generally favor[s] arbitration precisely because of the economics of dispute resolution" and that, as a general matter, courts "may not interfere in this bargained-for exchange." The Court then reasoned that the collective bargaining agreement's requirement that employees arbitrate these types of disputes "must be honored unless the ADEA itself removes this particular class of grievances from the [National Labor Relations Act's] broad sweep." The Court then held that the ADEA did not contain such a prohibition.

The holding in 14 Penn Plaza is consistent with Gilmer. Once parties to a contract agree that a particular dispute must be submitted to arbitration, an employee is bound to that agreement "unless Congress itself evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Finding that there was nothing in the language or legislative history of the ADEA that expressly precluded arbitration, the Court concluded in Gilmer that arbitrating disputes under the ADEA would not undermine the statute's "remedial and deterrent function."4

In 14 Penn Plaza, the Court specifically stated that its earlier interpretation of the ADEA in Gilmer, which involved an individual employment agreement, "fully applies in the collective-bargaining context." As Justice Thomas explained, "[n]othing 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."

Further, Justice Thomas opined that Gardner-Denver was decided at a time when arbitration was perceived as insufficient for a fair and reasoned determination of federal statutory claims. Over 20 years later, however, a wide range of federal claims are commonly arbitrated, and objections centered on the abilities of arbitrators, or the nature of arbitration itself, are no longer justified. Thus, the Court held that to the extent Gardner-Denver concluded that arbitrators are not capable of fairly deciding complex federal discrimination claims, that precedent has been overturned. Nevertheless, the Court explicitly left in place the holding from Gardener-Denver that the waiver of a federal statutory employment claim that is not clear and unmistakable, will not be enforced. Thus "a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law." A labor agreement that is not so clear would not require compulsory arbitration.

Implications, Opportunities, and Other Issues

Generally speaking, few existing collective bargaining agreements will meet the standard required for a court to hold that employees have waived their rights to a judicial forum. In 14 Penn Plaza, the collective bargaining agreement: (1) contained an express prohibition against discrimination based on protected characteristics under federal, state, and local laws; (2) specifically named the statutes at issue; and (3) explicitly stated, "[a]ll such claims shall be subject to the grievance and arbitration procedures . . . as the sole and exclusive remedy for violations." Such a provision is relatively unusual in today's labor agreements. While most labor agreements contain antidiscrimination provisions, those provisions are not typically worded as a waiver clause. Given the specific language in the labor agreement in 14 Penn Plaza, however, the Supreme Court concluded that the SEIU and the employees it represented had met the high "clear and unmistakable" standard originally set forth in Gardner-Denver.

Technically, the Court's decision in 14 Penn Plaza is limited to claims arising under the ADEA, but ultimately it may be applied to a broad range of federal, state, and local employment statutes, provided that the text and legislative history of the applicable statutes do not expressly exclude the claims covered by the statute from compulsory arbitration. As a result, during bargaining, employers may want to consider whether they can benefit from requiring bargaining unit employees to submit their discrimination claims to arbitration and, if so, the nature and types of claims that should be covered. This is especially true for employers in jurisdictions that have been confronted with the onslaught of wage and hour class action litigation. Depending upon other laws and how they have been interpreted, restricting these types of claims to arbitration could provide protection to employers who are concerned about possible class actions.

Of course, it goes without saying that a union may not be willing to consider expanding the areas that a collective bargaining agreement's grievance and arbitration procedure covers, and hard bargaining and/or concessions may be needed to obtain this expansion. In fact, while unions have traditionally sought "antidiscrimination" language in labor agreements as part of their duty to push for employee rights, if a waiver of a jury trial is now part of the process, unions may quickly back off such a strategy.

A further, serious concern was raised by the dissent in 14 Penn Plaza ‑ where the union acts as a gatekeeper to its members' statutory employment claims, it may fail to pursue valid claims, to the detriment of the employees. While those employees may file a subsequent claim against their union for unlawful discrimination or breach of the duty of fair representation, the success of such claims is limited as unions have a meaningful amount of discretion as to which cases they choose to arbitrate.

Recommendations and Practical Considerations

With the above analysis in mind, there are numerous points for employers to consider:

1. Employers should not immediately conclude that the best strategy is to require that claims of discrimination be processed through the contractual grievance and arbitration process. For some employers, that will be the best answer; but other employers may decide that choosing to fight discrimination claims in court is a better strategy.
2. Arguments in favor of binding arbitration are factors such as cost savings (arbitration is almost always cheaper than litigation), less delay and less risk of punitive damages. Particularly in states where damages are not capped and where juries are considered more pro-employee, labor arbitration may indeed be the better option.
3. Binding arbitration, however, is not necessarily the best method for resolving these types of statutory claims. Arbitrators can be as unpredictable as juries, and the favored arbitration remedy of reinstatement can be more costly in a real sense than damages. Further, unfavorable arbitration decisions are extremely difficult to overturn. Even an arbitrator's "manifest disregard for the law" may not be a valid ground for appealing an arbitrator's ruling. By comparison, federal and state courts provide for a significantly more robust system of appeal.
4. Another factor to consider is the potential for obtaining summary judgment in discrimination cases. Some federal courts are amenable to granting summary judgment motions in such cases absent relatively clear evidence of direct or indirect discrimination. In other jurisdictions, by comparison, summary judgment is difficult to obtain.
5. Following the advent of punitive damages and jury trial rights created by the Civil Rights Act of 1991, compulsory arbitration became more common. Some employers that went in that direction, however, subsequently moved away from binding arbitration. Others continue to find that compulsory arbitration is better for them than litigation. In short, employers should not necessarily view 14 Penn Plaza as a bandwagon on which to jump. They should instead confer with experienced labor counsel and make a determination as to which road to go down. That determination will include such diverse factors as the relationship between the employer and the union, the pool of available arbitrators and their willingness to uphold reasonable employer decisions, the ability of the same arbitrators to understand the difference between a claim of discrimination and "just cause" in a discharge case, the general demeanor of judges and juries in the jurisdiction in question, and, of course, cost and employee morale. Capable labor counsel can provide an analysis of all these factors and more.
6. Finally, if an employer does decide to negotiate with a union to require compulsory arbitration of employment statutory rights, it should confer with labor counsel to create language that will likely be upheld under 14 Penn Plaza. Some courts will undoubtedly seek to restrict the Supreme Court's decision, so crafting language will be an important task. As noted earlier, congressional action could also lead to future restrictions that would have to be considered.

1 While this change is certainly significant in the labor-relations context, it likely will not prevent the Equal Employment Opportunity Commission (EEOC) or any other federal or state agency from filing a lawsuit against the employer on behalf of the employee. However, as a practical matter, that is a fairly rare event.

2 415 U.S. 36 (1974).

3 500 U.S. 20 (1991).

4 The Arbitration Fairness Act (AFA), recently introduced in Congress, would prohibit the enforcement of mandatory agreements that require employees to submit their statutory employment claims to binding arbitration. Should the 14 Penn Plaza decision inspire greater interest in the AFA, Congress could legislatively overrule the Supreme Court's 14 Penn Plaza and Gilmer decisions. Littler's DC Employment Law Update blog is tracking this legislation and other labor and employment-related developments in Washington.

Gavin S. Appleby is a Shareholder in Littler Mendelson's Atlanta office. Hans Tor Christensen is Of Counsel in Littler Mendelson's Washington, D.C. office. Jennifer L. Mora is an Associate in Littler Mendelson's Portland office. If you would like further information, please contact your Littler attorney at 1.888.Littler, info@littler.com, Mr. Appleby at gappleby@littler.com, Mr. Christensen at tochristensen@littler.com, or Ms. Mora at jmora@littler.com.

ASAP is published by Littler Mendelson in order to review the latest developments in employment law. ASAP is designed to provide accurate and informative information and should not be considered legal advice.
© 2009 Littler Mendelson. All rights reserved.

Employment Arbitration

An estimated 15% to 25% of employers nationally have adopted mandatory employment arbitration procedures. This means that more than 30 million employees (1 out of every 4 non-union workers) must sign a clause in their employment contract that gives up their right to go to court and, instead, permits an arbitration firm (of the employer’s choosing) to resolve any future disputes they have with their employer. Binding mandatory arbitration clauses allow employers to effectively remove themselves from the enforcement of employment rights laws. This should alarm every worker in the U.S.

The use of mandatory arbitration of employment claims has risen rapidly since the early 1990s – after Congress made jury trials and money damages available under Title VII (in 1991), the passage of the Americans with Disabilities Act in 1992, and the number of discrimination charges filed skyrocketed. 1991 was also the year in which the Supreme Court upheld imposition of mandatory arbitration of an age discrimination claim.

Here’s how mandatory arbitration has affected Fonza Luke of Alabama:

Fonza Luke, a mother of four and a grandmother, started working as a licensed nurse practitioner for Baptist Health Systems (BHS) at its Medical Center in 1971. In November 1997, Fonza was told she must sign the new “Dispute Resolution Program,” which meant employees would have to go into arbitration if they had legal claims. Fonza did not want to forfeit her rights, so despite being told twice that she would be fired if she did not sign the agreement, she refused to sign it. Three years later, the hospital fired Fonza due to “insubordination” after almost 30 years of working for BHS with only the highest performance ratings. As a 59-year-old African-American woman, Fonza believed she was fired due to her race and age, so she filed claims with the U.S. Equal Employment Opportunity Commission and then in federal court. Even though she never signed anything, BHS asked the federal court to dismiss her case to arbitration. The federal court said that BHS could force her to arbitrate because she kept working in her job after they showed her its arbitration agreement. When she appealed the federal court’s decision, the appeals court ordered her into arbitration, where she lost completely. According to her lawyer, it was impossible for Fonza to get an arbitrator that was fair and unbiased, much less pro-employee. As a result, her claims of discrimination and retaliation were denied, and she got no relief whatsoever.

Illinois Appellate Court Says That An Employee of a Staffing Company Can Sue the Company’s Customer for Retaliatory Discharge

Borrowed Employee Has Retaliatory Discharge Claim

In a case of first impression, the Illinois Appellate Court determined that an employee of a staffing company could sue the company’s customer for retaliatory discharge.
Carrie Hester filed a complaint alleging that she had been assigned to work at Gilster-Mary Lee Corp. (“Gilster”) by her employer, Manpower, Inc. and that Gilster was her “de facto employer.”

Hester’s complaint included allegations that on September 13, 2006, under threat of subpoena, Hester gave testimony in the workers’ compensation case of another Gilster employee. The next day, Gilster informed Hester that it would not be using her services any longer and that if she wanted other employment she would have to return to Manpower, Inc.

Gilster filed a motion to dismiss Hester’s complaint, arguing that Hester’s actual employer was Manpower and that Gilster had not fired Hester. The trial court entered an order granting the motion to dismiss. Hester appealed.

The issue was whether there is a cause of action for retaliatory discharge for a borrowed employee whose employment with the borrowing employer is terminated for testifying in a coworkers’ worker’s compensation claim.

The rights and remedies of the Workers’ Compensation Act apply to borrowed employees. 820 ILCS 305/1(a)(4). A borrowing employer is primarily liable for payment of a borrowed employee’s workers’ compensation claim.
Additionally, borrowing employers can claim the protections of the Act. Nevertheless, Gilster argued that it should not be held accountable for terminating Hester’s employment.

According to the appellate court, the public policy considerations which led to recognition of an action for retaliatory discharge in Kelsay v. Motorola, Inc., 74 Ill.2d 172 (1978), apply equally to a claim by a borrowed employee against a borrowing employer. Therefore, an action for retaliatory discharge is available to a borrowed employee.

Gilster argued that Hester’s allegation that Manpower was her “employer” and Gilster was her “de facto employer” was an admission that defeated her claim. However, Hester alleged that Gilster set her daily hours, work schedule, hourly wage, job assignments, and her workplace, that no one from Manpower supervised her work in any way, and that she worked side-by-side with regular Gilster employees.

According to the court of appeals, the public policy of providing efficient and expeditious remedies for injured employees would be seriously undermined if borrowing employers such as Gilster were permitted to abuse their power by discharging their borrowed employees in retaliation for exercising their rights under the Act. When faced with that dilemma, many workers like Hester would simply choose not to exercise their rights in order to retain their employment.
Finally, the court had to decide whether Hester had alleged that her discharge was in retaliation for participation in a protected activity. The court found that Hester stated a cause of action for retaliatory discharge because there is a clear public policy favoring the prompt and efficient resolution of workers’ compensation cases.

The case was remanded for further proceedings. Hester v. Gilster-Mary Lee Corp., 386 Ill. App. 3d 1104, 326 Ill. Dec. 372, 899 N.E.2d 589, (5th Dist. 2008).

Mayoral Control: In The End, It Became a Voting Rights Issue

In New York City parents are furious with Mayor Michael Bloomberg and public school chancellor Joel Klein for destroying channels of communication to and from New York City's Board of Education elite. We are seeing the true rise of the public education-political-complex which resembles President Eisenhower's "military-industrial-complex" in many ways. Read the article below published in 2006.

Detroit Leaning
Mayor Villaraigosa has been touting a straightforward plan to take over the county's public schools,
By Ryder Palmere, City Beat
LINK

In recent weeks, Los Angeles Mayor Antonio Villaraigosa (pictured below) has a made a show of traveling to Chicago and New York to talk to mayors Richard Daley and Michael Bloomberg, respectively, about how to follow their lead and shift control of L.A.'s public schools to his office. In both instances, he talked to two powerful operators in classic, strong-mayor systems, where the mayor is able to appoint and manipulate the school board, and the city council, to achieve his ends.



The situation in L.A. may be much more complicated - even to the point of confusion. The City of L.A. has a relatively weak mayoral system, where the city council has significant budgetary and appointment power, and, from the plans presented thus far, it doesn't seem that Villaraigosa would end up with as much authority as his counterparts in Chicago or New York. They may not, then, be the most accurate comparisons for what might happen in Los Angeles.

Even in those cities, however, school advocates report that mayoral takeover has yielded mixed results. In New York City, the country's largest public school district, the jury is still out. Bloomberg claims that test scores across the district jumped instantly with his involvement - and then campaigned on the issue - but most school watchers say it's too early to make that claim. In Chicago, where Daly first grabbed control of the school system in 1995, takeover has given the mayor power to undertake dramatic, high-profile makeovers on inner-city schools, but overall test scores remain low and most school facilities remain in underfunded or even dilapidated condition.

To that end, it seems more pertinent (and perhaps more realistic) to look at a city whose mayoral powers, and takeover bid, were relatively weak. Like Detroit.

In 1998, Republican Michigan Governor John Engler sized up the city schools' plummeting test scores and rocketing dropout rates and asked then-Mayor Dennis Archer to take control. He and his Deputy Mayor Freman Hendrix were against the idea. Their concern was that it would create more division within the governing structure, amplifying the existing problems. But Republicans controlled the state legislature and pushed through the takeover, which took effect in March 1999.

Many legislators questioned the move from the outset. In early 1999, state Senator Burton Leland, a Detroit Democrat, was quoted as saying, "What gives this chamber and the governor the right to remove an elected body? The present school board was elected by a million people in Detroit, and you're going to throw them out?"

Hendrix saw the takeover as a recipe for disaster. After the structure was put in place, the first concern of those backing it was how to make it stick. "I remember saying 'You'll never make it permanent,'" he says. "The best thing that anybody can hope for is to run as fast ´´ as you can and make as many academic and capital improvements as you can. Because after five years, Detroit is going to vote, and when they do, they're going to vote to return to a fully-empowered school board."

That is what precisely happened. The mayor appointed a new board, which then selected Dr. Kenneth Burnley to serve as CEO of public schools and assume powers originally designated to the superintendent and the board. He then set budgets, made policy decisions, and negotiated contracts within the public school system. The mayor's appointed board thus had control of the CEO, but voters did not, and many were immediately at odds with the system. Lacking a forceful control of city council, the mayor was unable to take strong measures to rebuild infrastructure or change policy outside the school system to support the effort - and didn't have the money to do that, anyway. The best they could hope for was better financial management of the district.

Assuming Villaraigosa could find money and work his magic in the community, the Detroit system is still less compromised than that proposed by Villaraigosa on March 20. His plan would retain a greatly-weakened, but still elected, school board, and the mayor would appoint the superintendent and oversee budgets. This would pit the superintendent against the board, setting up a potential power struggle.

In Detroit, concerned parents immediately worried that the demand for a mayoral takeover didn't come from the families who would be directly affected. It came largely from the business community.

"Oftentimes," says Freman Hendrix, "kids and parents get lost in public school agendas. Nobody gives a shit about the kids. That ends up being the secondary concern. The priority is the vendors, the contractors, the politicians, the school teachers, and the unions. It's the people making money."

A study by the Michigan Educational Report, published by the nonpartisan research and policy group, Mackinac Center for Public Policy, identified that two of the primary problems spurring the takeover were: 1) rapidly declining enrollment and graduation rates, and 2) plummeting test scores. The December 15, 2005 report stated: "the test score gap between Detroit and the rest of the state has diminished, but remains large, and sought-after improvements in financial management have failed to materialize."

Even with two separate national studies to assess accurate graduation rate estimations (by the Manhattan and Urban Institutes), flawed and outright missing data made it impossible to determine the effectiveness of the takeover with any certainty.

Detroit Public Schools, prior to the takeover, reported an on-time graduation rate of 30 percent. The following year, they reported an astounding 88 percent. The Detroit Free Press reported that irregularities in district numbers were largely to blame for this giant leap. One cause of the rate increase was due to the fact that students who fail to graduate to the next grade are not included in the graduation rate calculation.

When the takeover began, student enrollment was at 179,103. By early 2005, it had dropped to an estimated 140,000, and is expected to decline another 10,000 in the current school year. According to the Michigan Education Report, reading scores went up from 36.3 percent to 57.4 percent during the takeover. Math scores, however, plummeted.

"In the first year of the takeover," says Tom Shull, senior editor for the Mackinac Center, "they did manage to get done the majority of the quick fixes. They did things like fix roofs that were leaking. It was the operational stuff that had been neglected."

According to a financial report released by MGT of America, Inc., a consulting firm, the district's fiscal discipline has deteriorated since 1999.

Quixotically, though, the district did get easier to manage. "It was easier to look through the books," says Shull. "It was easier to audit, easier to track the bond money, which was a big issue. We had a billion-dollar bond issue that essentially sat unspent for a number of years until the takeover."

Largely absent, however, was a definitive process that the appointed board would use to relieve the district of its problems. According to the Michigan Education Report, "even many of the bill's backers admitted that it was a speculative endeavor."

And one that apparently didn't yield many results. Finally, in a city with an elevated sense of voter empowerment born of the civil rights era, the people were pissed. On November 8, 2005, Detroit voters chose to quit the experiment on mayoral control and returned power to an elected school board, which resumed control in January.

"In the end, it became a voting rights issue," says David Adamany, who served as interim CEO before Dr. Burnley was appointed. "The voting rights issue usurped anything else in a largely African-American city." The residents of Detroit ultimately felt as though the takeover was something done to them, not for them. "The more people have a say in terms of what they think ought to happen, they'll be more cooperative and feel a part of things. Even though I involved a lot of people in Detroit, they felt it wasn't something for them."

Published: 04/13/2006