In a case testing the High Court's decidedly pro-arbitration policy, a deeply divided US Supreme Court narrowed union members' statutory right to sue in a judicial forum, holding 5-4 that courts must enforce collective bargaining agreements (CBAs) that clearly and unmistakably require union members to arbitrate their claims arising under the Age Discrimination in Employment Act of 1967 (ADEA). This means that unions, on their members' behalf, can negotiate a CBA that requires its members to arbitrate their age bias claims. In this case, the union and employer freely negotiated a CBA providing that statutory discrimination claims, including ADEA claims, were subject to mandatory arbitration, explained the Court, and the ADEA does not preclude arbitration of claims brought under the statute (14 Penn Plaza LLC v Pyett, Dkt No 07-581. Decided April 1, 2009).
Background. The legal issues in Pyett stem from tensions between two lines of Supreme Court authority dealing with collective representation and individual statutory rights. In Alexander v Gardner-Denver Co (7 EPD ∂9148), the High Court held that union contracts cannot waive a member's right to litigate claims in court, explaining a union must represent the interests of all its members, and such interests may conflict with those of an individual employee. However, in a later decision, Gilmer v Interstate/Johnson Lane Corp (56 EPD ∂40,704), the Court held that individual employment agreements can require employees to arbitrate their claims. Though the Gilmer Court rejected Alexander's mistrust of arbitration, the Gilmer Court expressly distinguished, rather than overruled, Alexander, on the basis that the arbitration agreement in Gilmer was individually negotiated and not union negotiated.
In the underlying opinion (90 EPD ∂42,937) to which certiorari was granted, the Second Circuit Court of Appeals took the side of Gardner-Denver when it upheld its own precedent in Rogers v New York Univ (78 EPD ∂40,131), concluding that three union members who tried to bring age bias claims in federal district court, despite being covered by a CBA's mandatory arbitration clause, could pursue those claims in court. They were members of Local 32BJ of the Service Employees International Union and were covered under a CBA with the Realty Advisory Board on Labor (RAB), a multi-employer bargaining association. They were employed by a building service and cleaning contractor who did work for the operator of a New York City office building where the members worked as night watchmen. The CBA contained a mandatory binding arbitration clause for discrimination claims. The applicable clause provided: "All such claims shall be subject to the grievance and arbitration procedure [in the agreement] as the sole and exclusive remedy for violations."
After the union members were reassigned to less-desirable positions, they filed grievances with the union asserting, among other things, age discrimination. When the union did not pursue their grievances, the members filed charges with the EEOC, claiming violations of the ADEA. Their employer and the building operator moved to compel arbitration, but the motion was denied. The district court, following Rogers, held that union-negotiated waivers of statutory rights in CBAs were unenforceable and denied the employer's motion to dismiss. The defendants appealed.
Reaffirming its ruling in Rogers, the Second Circuit held that the three members could pursue their discrimination claims in federal court because "mandatory arbitration clauses in collective bargaining agreements are unenforceable if they waive the rights of covered workers to a judicial forum for federal statutory causes of action." In so holding, the Second Circuit expressly affirmed the Supreme Court's holding in Gardner-Denver.
In granting certiorari, the Supreme Court agreed to address the following question: "Is an arbitration clause contained in a collective bargaining agreement, freely negotiated by a union and an employer, which clearly and unmistakably waive the union members' right to a judicial forum for their statutory discrimination claims enforceable?"
Supreme Court. Reversing the Second Circuit's decision in favor of the members, the Court held "a [CBA] that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law."
"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," wrote the Court. The union and the RAB, negotiating on behalf of the building operator, 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, held the Court, all but reversing Gardner-Denver.
While the members contended that the arbitration clause at issue was outside the permissible scope of the collective bargaining process because it affected "employees' individual, non-economic statutory rights," the Court disagreed, finding that "parties generally favor arbitration precisely because of the economics of dispute resolution." As in any contractual negotiation, a union may agree include an arbitration provision in a CBA in return for other concessions from the employer, and courts generally may not interfere in this bargained-for exchange. 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, explained the Court, and in Gilmer, the Court squarely held that the ADEA does not preclude arbitration of claims brought under the statute.
In so holding, the Court extended its decision in Gilmer to collective bargaining agreements. It wrote: "The Gilmer Court's interpretation of the ADEA fully applies in the collective-bargaining context. Nothing in the law suggests a distinction between the status of arbitration agreements signed by an individual employee and those agreed to by a union representative."
Accordingly, held the Supreme Court, "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." Because the members never raised any claims as to whether the agreement was clearly and unmistakenly required them to arbitrate, their claims were forfeited, held the Supreme Court.
Gardner-Denver does not change the analysis. The CBA's arbitration provision is also fully enforceable under the Gardner-Denver line of cases, held the Court, finding that the members incorrectly interpreted Gardner-Denver and its progeny to hold that unions cannot waive an employee's right to a judicial forum under federal antidiscrimination law. Those cases "did not involve the issue of the enforceability of an agreement to arbitrate statutory claims," but "the quite different issue of whether arbitration of contract-based claims precluded subsequent judicial resolution of statutory claims," explained the Court. Gardner-Denver does not control the outcome where, as in this case, the CBA's arbitration provision expressly covered both statutory and contractual discrimination claims.
Apart from their narrow holdings, the Court also noted the Gardner-Denver line of cases included broad dicta highly critical of the use of arbitration for the vindication of statutory anti-discrimination rights that have since been abandoned. This dicta erroneously assumed that: (1) an agreement to submit statutory discrimination claims to arbitration was tantamount to a waiver of those rights; and (2) 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." In addition, the dicta erroneously assumed that, in arbitration, a union may subordinate an individual employee's interests to the collective interests of all members in the bargaining unit, cannot be relied on to introduce a qualification into the ADEA that is not found in its text. These errors have all been corrected, confirmed the Court.
The Court explained that arbitral tribunals are readily capable of handling the factual and legal complexities of antitrust claims, notwithstanding the absence of judicial instruction and supervision. This capacity extends with equal force to discrimination claims brought under the ADEA, held the court. Moreover, the recognition that arbitration procedures are more streamlined than federal litigation is not a basis for finding the forum somehow inadequate; the relative informality of arbitration is one of the chief reasons that parties select arbitration. There is also no conflict-of-interest between arbitration and collective bargaining: union members may bring a duty of fair representation claims against unions; unions can be subjected to direct liability under the ADEA; and union members may also file age bias claims with the EEOC and the NLRB.
Dissents. In his dissenting opinion, Justice Stevens believed that Gardner-Denver controlled the outcome of the case, finding that the "majority's preference for arbitration leads it to disregard our precedent." Justice Souter agreed, finding that members subject to a CBA providing for conclusive arbitration of all grievances, including claimed breaches of the ADEA, do not lose their statutory right to bring an ADEA claim in court. "We unanimously held in Gardner-Denver that 'the rights conferred' by Title VII (with no exception for the right to a judicial forum) cannot be waived as 'part of the collective bargaining process,'" wrote Souter. This applies equally to the ADEA, he said.
Justice Clarence Thomas delivered the opinion of the Court with Chief Justice John G. Roberts, Jr. and Justices Antonin Scalia, Anthony M. Kennedy and Samuel A. Alito, Jr., joining him in the opinion. Justice John Paul Stevens issued a dissenting opinion. Justice David H. Souter also issued a dissenting opinion in which Justices Stevens, Ruth Bader Ginsburg and Stephen G. Breyer joined.
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