In 14 Penn Plaza LLC v. Steven Pyett et al, 2009 WL 838159 (2009), the Supreme Court ruled five to four that a collective bargaining agreement that "clearly and unmistakably requires union members to arbitrate an ADEA claim is enforceable as a matter of federal law." This result was sought by the employer and fought by the unions involved in the case. Commentators have already stated that the decision is "welcome news" for employers. Before deciding how "welcome" the decision is for employers, however, many issues have to be considered.

The decision in 14 Penn Plaza LLC considered two lines of Supreme Court cases: (1) the 1991 decision in Gilmer v. Interstate/Johnson Lane Corp, which held that individuals could agree to arbitrate their age discrimination claims and waive their right to litigate the matter in federal court, and (2) the 1974 decision in Alexander v. Gardner-Denver Co., which held that an arbitration award finding that an employee was discharged for just cause did not preclude the employee from pursuing his statutory rights in federal court.

In Penn Plaza, the Supreme Court held that if the CBA "clearly and unmistakably" covered statutory claims and required them to be arbitrated, the arbitration provision was enforceable under Gilmer and not barred by Gardner-Denver. The court reasoned in pertinent part that (1) agreeing to resolve statutory discrimination claims via arbitration is not a waiver of any substantive federal rights — it waives only the right to seek relief from a court in the first instance; (2) arbitral forums are readily capable of handling discrimination claims; and (3) the fact that unions can decide whether to take particular cases to arbitration (and, therefore, may elect not to pursue a particular claim of discrimination) is an inherent component of the National Labor Relations Act and, in any event, Congress accounted for any conflict of interest between an employee and a union by subjecting unions to a duty of fair representation.   

Narrowness of the Decision

It is important to note the narrowness of the decision. First, the court assumed that the CBA in question was sufficiently explicit to constitute a waiver. Unlike many CBAs that contain a generic discrimination provision saying that the parties will not discriminate on the basis of various protected classifications, the CBA in Penn Plaza specifically stated that "claims made pursuant" to numerous named federal, state and local laws "shall be subject to the grievance and arbitration procedures … as the sole and exclusive remedy." Therefore, most CBAs would have to be renegotiated before an employer could obtain the "benefit" of the decision.

Second, the court stated that it was not deciding whether the union could or did block the employees from effectively vindicating their rights, because that issue was not fully briefed and involved disputed issues of fact. Thus, it remains to be determined exactly what a union must and must not do to effectively vindicate the federal statutory rights of its members under discrimination laws.

How Welcome is the Decision?

Although 14 Penn Plaza LLC certainly gives employers an opportunity to consider requiring its employees covered by a CBA to arbitrate statutory claims, there are many hurdles that must be overcome before that can be achieved and it is far from clear whether employers will benefit if they clear those hurdles.  

First and foremost, employers will have to get unions to agree to a provision that "clearly and unmistakably" requires employees to arbitrate statutory claims. Based on union opposition expressed in the amicus briefs filed in Penn Plaza, employers should anticipate that unions will not readily agree to such proposals because they add greater risk to unions in the form of duty of fair representation claims if they do not adequately represent the employee and will require unions to take steps to which they may not be accustomed.  

Second, the court in Penn Plaza was careful to note that the only thing being waived was the right to pursue a claim in federal court and not any other substantive rights. Many cases dealing with individual agreements to arbitrate statutory claims require that the agreement provide some minimum protection for the employee to engage in discovery and pursue a wide array of damages, and it is not clear how these rights will be effectuated within a collectively bargained grievance and arbitration process.

Third, employees may demand that an attorney handle their statutory claim, rather than a union business agent or representative, and may even want their personal attorney involved. In general, however, personal attorneys are excluded from arbitration proceedings. Nonetheless, under most discrimination statutes, counsel fees can be awarded. Thus, it is not clear whether an employer could be required to pay for the union's attorney fees.

Fourth, arbitrators will be required to apply federal and state EEO law. In this regard, the CBA in Penn Plaza specifically stated that the arbitrator "shall apply appropriate law in rendering decisions." While many arbitrators may certainly be capable of this, it is certainly something outside of their general area of expertise.

Finally, the scope of review of arbitration awards is much more limited than judicial decisions. That is the price paid for a process that is generally faster and more efficient in resolving disputes. However, if arbitration of statutory claims turn into mini-trials, that limited scope of review may become much more detrimental.

Conclusion

Having the option of avoiding the time and expense of litigation is certainly beneficial for employers. Before an individual employer decides to pursue that option, however, it must consider whether the potential costs and downsides outweigh the benefits.