On April 1, 2009, the U.S. Supreme Court held that a provision in a collective bargaining agreement requiring employees to arbitrate claims under the Age Discrimination in Employment Act (ADEA) is enforceable. Because the arbitration clause was freely negotiated and “clearly and unmistakably” requires arbitration of age discrimination issues, the Court stated, it had “no legal basis” to strike down the provision. 14 Penn Plaza LLC v. Pyett, No. 07-581, U.S. Supreme Court (April 1, 2009).

Factual Background

Temco Service Industries, Inc., a maintenance service and cleaning contractor, employed night lobby watchmen to work in a New York City office building. The building was owned and operated by 14 Penn Plaza LLC, which is a member of the Realty Advisory Board on Labor Relations, Inc. (RAB), a multiemployer bargaining association for the New York City real estate industry.

In August 2003, 14 Penn Plaza entered into a contract with Spartan Security, a security services contractor and affiliate of Temco, to provide security guards to staff its building. As a result, Temco reassigned the night lobby watchmen to jobs as night porters and light duty cleaners in other locations of the building. According to the workers, who were all members of the Service Employees International Union, Local 32BJ, the less desirable reassignments paid less and caused them emotional distress.

The union and the RAB were parties to the Collective Bargaining Agreement for Contractors and Building Owners (CBA), which required union members to submit their claims of employment discrimination (including those brought under the ADEA) to binding arbitration. At the workers’ request, the union filed grievances alleging that 14 Penn Plaza and Temco violated the CBA’s ban on discrimination by reassigning the workers on the basis of their age (among other claims). The union later requested arbitration under the CBA. Since the union had consented to Spartan Security’s contract, however, it withdrew the workers’ age discrimination claims from arbitration.

The workers then filed suit in federal court, claiming that their reassignment violated the ADEA (in addition to state and local laws prohibiting age bias). The trial judge rejected a motion to compel arbitration, finding that a union-negotiated waiver of a right to litigate was unenforceable. The Second Circuit Court of Appeals affirmed this decision and also refused to compel arbitration finding that a 1974 Supreme Court decision, Alexander v. Gardner-Denver Co., forbids enforcement of such arbitration provisions.

Legal Analysis

In writing for the narrow 5-4 majority, Justice Clarence Thomas first noted that the National Labor Relations Act (NLRA) gave the union and the RAB statutory authority to collectively bargain for arbitration of discrimination claims. Because the union and the RAB collectively bargained in good faith when they agreed that ADEA claims would be resolved in arbitration, the Court held, the arbitration provision “must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep.”

With regard to the ADEA, the Court found that the only requirement on agreements to arbitrate statutory discrimination claims is that they must be “explicitly stated” in the collective bargaining agreement. In this case, since the CBA “clearly and unmistakably” required arbitration of ADEA claims, the Court ruled that it met this requirement.

After concluding that the two federal statutes at issue did not preclude arbitration of age bias claims, the majority addressed the impact of the Gardner-Denver line of cases. The Court distinguished the facts underlying these cases from the one at issue by noting that the workers in the Gardner-Denver line of cases had not specifically agreed to arbitrate their statutory claims. Because in this case the CBA’s arbitration provision covered both statutory and contractual claims, the Court ruled that the Gardner-Denver line of cases did not apply.

Thus, the Court concluded that “a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.”

Practical Impact

According to Brian McDermott, a shareholder in Ogletree Deakins’ Indianapolis office: “Although clearly divided, the Supreme Court ultimately reaffirms arbitration as a proper vehicle to resolve workplace disputes. This pivotal case marks the first time the Court has held that individual employees’ federal discrimination claims must be arbitrated under a collective bargaining agreement. Accordingly, where a collectively-bargained agreement ‘clearly and unmistakably’ requires union members to arbitrate their ADEA – and likely other statutory – claims, such an agreement may be enforced. Whether Congress will allow the ruling in 14 Penn Plaza to remain on the books, or will instead address this issue legislatively, remains to be seen. In the absence of any such action, employers interested in taking advantage of 14 Penn Plaza should negotiate ‘clear and unmistakable’ waivers requiring arbitration of individual discrimination claims.”

Additional Information

If you have questions about this ruling or its impact on employers, contact the Ogletree Deakins attorney with whom you normally work or the Client Services Department at (866) 287-2576 or via e-mail at clientservices@ogletreedeakins.com.

Note: This article was published in the April 1, 2009 issue of the National eAuthority.


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