Supreme Court Upholds Arbitration Requirement in Collective Bargaining Agreement

April 1, 2009

In a significant decision, the Supreme Court today held that a collective bargaining agreement (CBA) that clearly and unmistakably requires union members to arbitrate federal age discrimination claims is legally enforceable.  See 14 Penn Plaza LLC et al., v. Pyett et al., No. 07-581, U.S. Supreme Court (Apr. 1, 2009). 

After three unionized night watchmen brought suit alleging that they were reassigned to less desirable positions based on their age in violation of the Age Discrimination in Employment Act (ADEA), their employers filed a motion to compel them to arbitrate their discrimination claim as provided for in the applicable CBA.  The United States District Court for the Southern District of New York denied the motion, and the Second Circuit affirmed, relying on the Supreme Court’s decision in Alexander v. Gardner-Denver Co., 415 U.S. 36, 49-51 (1974), and holding that "a collective bargaining agreement could not waive covered workers’ rights to a judicial forum for causes of action created by Congress."

The Supreme Court reversed the Second Circuit, holding the CBA’s arbitration requirement to be enforceable.  The decision, written by Justice Thomas on behalf of a five-justice majority (Chief Justice Roberts and Justices Scalia, Kennedy, and Alito), began with an analysis of the text of the National Labor Relations Act (NLRA) and the ADEA.  The NLRA, the Court explained, generally confers upon labor unions the authority to negotiate provisions on behalf of their members requiring the arbitration of claims, consistent with their role in negotiating "conditions of employment" and subject to their duty of fair representation.  Next, the Court examined the text of the ADEA for evidence that Congress intended to preclude a waiver of judicial forum for ADEA claims and, drawing on a previous decision upholding an individual employee’s waiver, found none.  Because the NLRA made arbitration agreements a proper subject of collective bargaining, and because Congress did not preclude such agreements in the ADEA, the Court concluded that the arbitration provision at issue was enforceable.

The majority distinguished the present case from the 1974 Gardner-Denver decision, on which the Second Circuit had relied.  Gardner-Denver, the Court explained, did not involve an agreement to arbitrate statutory claims.  The majority acknowledged some "broad dicta" in Gardner-Denver and other cases "that was highly critical of the use of arbitration for the vindication of statutory antidiscrimination rights," and that reflected "mistrust of the arbitral process," but stated that such dicta represented a "misconceived view of arbitration that this Court has since abandoned."  Indeed, the Court warned that "reliance on any judicial decision similarly littered with [such] overt hostility to the enforcement of arbitration agreements would be ill advised."

Finally, the Court declined to rule on whether the union had sufficient control over the arbitration process to prevent its members from "effectively vindicating" their statutory rights—an issue contested by the parties—but suggested that, if the union did have such authority, it might well render the waiver of judicial forum unenforceable, at least if actually exercised to block an employee from vindicating his rights.

Four justices dissented.  Justice Souter argued that the majority’s ruling could not be squared with Gardner-Denver and therefore was precluded by stare decisis.  He also suggested that unions generally control access to the arbitral forum to such an extent as to render waivers of judicial forum unenforceable, and therefore the impact of the majority’s holding "may have little effect."  Justice Stevens wrote separately to state that the majority’s preference for arbitration had caused it to give short shrift to precedent. 

The decision in 14 Penn Plaza resolves a controversy that had divided the courts for a number of years and underscores the broad authority vested in unions to make agreements binding on their members, a particularly sensitive issue given the current debate over the "Employee Free Choice Act."  Interestingly, Congress recently enacted a "whistleblower" protection provision in the stimulus bill that provides that certain whistleblower claims cannot be subject to arbitration (although the law contains a somewhat ambiguous exception permitting arbitration under collective bargaining agreements).  See American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, § 1553(d).  The Court’s decision could give added impetus to the Arbitration Fairness Act, H.R. 1020, which would declare various consumer and employee arbitration agreements invalid.  The long-term impact of the decision thus remains uncertain.

Gibson, Dunn & Crutcher LLP

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Labor and Employment Practice Group

Eugene Scalia – Practice Co-Chair, Washington, D.C. (202-955-8206, [email protected])
William J. Kilberg P.C. – Washington, D.C. (202-955-8573, [email protected])
Jason C. Schwartz – Washington, D.C. (202-955-8242, [email protected])
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