SCORE ONE FOR EMPLOYERS: ARBITRATION OF ADEA CLAIMS ENFORCEABLE UNDER COLLECTIVE BARGAINING AGREEMENTS

The Supreme Court has upheld the enforceability of arbitration provisions in collective bargaining agreements which require employees to arbitrate claims under federal antidiscrimination laws. The ruling in 14 Penn Plaza v. Pyett is welcome news to employers, as mandatory arbitration of employment discrimination claims will help lessen the risk of outrageous plaintiffs' verdicts so frequently associated with trial before a jury.

Petitioner 14 Penn Plaza LLC owns and operates the New York City office building where Respondents worked as night lobby watchmen and other similar capacities pursuant to a collective bargaining agreement (CAB) which provided that all claims made under Title VII, the Americans with Disabilities Act (ADA), and the Age Discrimination in Employment Act (ADEA) were subject to binding arbitration. After 14 Penn Plaza, with the Union's consent, engaged licensed security guards for the building, Respondents were reassigned to jobs as porters and cleaners. Arguing the reassignments led to a loss in income, other damages, and were otherwise less desirable than their former positions, Respondents asked their Union to file grievances alleging, among other things, that 14 Penn Plaza 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. The Union requested arbitration under the CBA, but 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. Following a four-day hearing, the arbitrator denied all of the remaining claims.

The employees then filed a lawsuit in federal district court alleging that their reassignment violated the ADEA. Believing the issue had already been resolved by arbitration, 14 Penn Plaza asked the court to dismiss the lawsuit or, in the alternative, to refer the case back to arbitration to resolve the federal claims of age discrimination. The court did neither, but rather held the CBA arbitration provision violated Respondents' rights to pursue their claims in a federal courtroom. On appeal, the U.S. Court of Appeals for the Second Circuit agreed, holding, "[a] union negotiated mandatory arbitration agreement purporting to waive a covered worker's right to a federal forum with respect to statutory rights is unenforceable."

Existing precedent includes a 1974 case, Alexander v. Gardner-Denver, where the Supreme Court held that union-negotiated arbitration agreements regarding federal rights are unenforceable. Thereafter, in Gilmer v. Interstate/Johnson Lane, the court held that individual arbitration agreements are enforceable as long as their terms are "clear and unmistakable." The Supreme Court's uncertainty on this issue has caused a great deal of confusion among lower courts.

On April 1, 2009, in a 5-4 decision, the Supreme Court reversed the Second Circuit and held that a collective bargaining agreement that requires employees to arbitrate discrimination claims is enforceable. The High Court found, "[a]s 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. . . . [c]ourts generally may not interfere in this bargained for exchange." The Court further held, in response to Respondents' reliance on Gardner-Denver, that although Title VII, the ADA, and the ADEA protect important substantive rights, they do not prohibit employees from pursuing these rights in arbitration. Consequently, a union may agree to submit employees' discrimination claims to binding arbitration.