14 Penn Plaza LLC v. Pyett: The Supreme Court Bolsters Arbitration Clauses in Collective Bargaining Agreements

By R. Joseph Leibovich
Shuttleworth PLLC
(901) 328-8269

The United States Supreme Court recently issued a ruling that arguably represents a drastic change in the enforceability of arbitration clauses in collective bargaining agreements (CBAs). In 14 Penn Plaza LLC v. Pyett, a sharply divided Court all but reversed a line of cases going back more than 30 years.

In Pyett, a group of employees who were members of the Service Employees International Union were employed by a maintenance service and cleaning contractor in a New York building. The building hired a security firm, which led the employer to reassign some of the employees to other duties and locations within the building. Ultimately, some of the employees sued under the Age Discrimination in Employment Act (ADEA) as well as state and local laws, alleging age discrimination.

The employer and the building owners (collectively “Petitioners”) filed a motion to compel arbitration, based on a clause in the relevant CBA which stated, in part “There shall be no discrimination against any present or future employee by reason of race, creed, color, age, disability, national origin, sex, union membership, or any other characteristic protected by law, including, but not limited to, claims made pursuant to Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the New York State Human Rights Law, the New York City Human Rights Code, … or any other similar laws, rules, or regulations. All such claims shall be subject to the grievance and arbitration procedures … as the sole and exclusive remedy for violations.”

The District Court denied the motion, and the Second Circuit upheld the denial on the basis of the U.S. Supreme Court’s 1974 decision in Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), which the Second Circuit noted held that a CBA could not waive an individual employee’s rights to file a cause of action when such a cause of action is created by Congress. The Second Circuit noted that there exists some tension between Gardner-Denver and a 1991 U.S. Supreme Court decision, Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), which held than individual employees could waive the right to a private cause of action under the ADEA in the face of an individually entered into arbitration agreement.

The Pyett Court reversed the Second Circuit.

Writing for the majority, Justice Thomas noted that under the National Labor Relations Act (NLRA), the Union is the exclusive representative of employees for the purposes of collectively bargaining over rates of pay, wages, hours of employment and other terms and conditions of employment. The Court stated that claims of discrimination, including those under the ADEA, are clearly conditions of employment and therefore subject to mandatory bargaining. Thus, the Court reasoned, an arbitration clause regarding claims under the ADEA, are enforceable.

The Pyett Court held that unless a statutory cause of action specifically bars mandatory arbitration agreements, then such agreements are enforceable. The ADEA has no such bar.

The Court further stated that Gardner-Denver and its progeny do not prohibit such mandatory arbitration clauses in CBAs. The majority opinion stated that Gardner-Denver refused to enforce an arbitration provision because the clause in question did not specify that statutory claims must be arbitrated.

The majority opinion recognized that Gardner-Denver and the cases that followed contained dicta critical of arbitration. The Court dismissed several concerns over the efficacy of arbitration.

The Pyett Court held that a “collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law.”

Four Justices disagreed with this decision, and Justice Stevens and Justice Souter both authored dissents (with Justices Ginsberg and Breyer joining) very critical of the majority’s decision. Justice Stevens wrote that the opinion disregard’s the Supreme Court’s precedent. Justice Souter noted that Gardner-Denver expressly forbade the enforcement of an arbitration clause in a CBA regarding an individual’s Title VII claim. Justice Souter’s strong dissent added “The majority evades the precedent of Gardner-Denver as long as it can simply by ignoring it.”

Justice Souter does note that the majority opinion reserved the question of whether a CBA’s waiver of claims is enforceable when the union controls access to and presentation of employee claims.

However, the dissent strongly argues that this decision blatantly ignores precedent established by Gardner-Denver and numerous subsequent cases.

The majority opinion, of course, does not agree. However, the Court noted that even if the dissent’s interpretation of Gardner-Denver is correct, then that case would “appear to be a strong candidate for overruling…”

What Does This Mean to Employers?

The Pyett case is confusing. While it is technically limited to ADEA claims, the majority’s analysis would appear to be applicable to all claims, despite the language in Gardner-Denver. If employers want a mandatory arbitration clause in a CBA (or, for that matter, in a private agreement), the clause should be clear and explicitly name the statutory rights which are to be covered by the clause. It is not enough to simply say “all claims must be arbitrated.” The clause should specifically list all statutory claims that are subject to arbitration. Employers must also be cognizant that Pyett may not reach Title VII claims. However, it appears that a good argument could be made that Pyett should apply to all statutory claims in which the statute does not prohibit mandatory arbitration. Of course, it will take some time before we know whether or not that is the case, and employers should be aware of this concern. In any case, all arbitration clauses, whether in a CBA or in an individual agreement outside the union setting, should be as clear and explicit as possible.

The articles published in this blog are for informational purposes only, and are not intended to be legal advice or a solicitation for legal services. For specific legal questions and issues, you should contact an attorney of your choice.