ALERT: Supreme Court Upholds Provision in Labor Agreement Requiring Arbitration of Age Discrimination Claims

On April 1, 2009, the Supreme Court issued its ruling in 14 Penn Plaza LLC v. Pyett, No. 07-581, holding that a collective bargaining agreement ("CBA") that clearly and unmistakably requires union members to arbitrate their claims under the Age Discrimination in Employment Act ("ADEA"), and by extension other antidiscrimination laws, is enforceable as a matter of federal law. This case clarifies and expands an area for collective bargaining and removes the obstacle, stemming from Alexander v. Gardner-Denver, 415 U.S. 36 (1974), that has hindered use of arbitration for the individual statutory claims of union-represented employees. Jones Day represented the Chamber of Commerce of the United States, as amicus curiae, in this case in both the Supreme Court and the Court of Appeals.

Justice Thomas’s opinion for the Court (5-4) reasons broadly that unions have the authority as the collective bargaining agent under the National Labor Relations Act ("NLRA"), as amended, to negotiate final, binding dispute resolution procedures for the employees they represent, even if the disputes in question arise under federal or state antidiscrimination and other statutes. Like any other provision negotiated by the exclusive representative, "the CBA’s arbitration provision must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep." Finding that the ADEA does not exclude such claims from the labor arbitration process, the Court concluded that, "there is no legal basis … to strike down an arbitration clause in this CBA, which was freely negotiated by the Union and the [Employer], and which clearly and unmistakably requires [the union-represented employees who filed suit] to arbitrate the age-discrimination claims at issue in this appeal."

The plaintiffs-respondents, as well as the dissenting opinions, emphasized the importance of stare decisis given their view that Gardner-Denver resolved the issue in this case. For the majority, however, Gardner-Denver rested "on the narrow ground that the arbitration was not preclusive because the collective-bargaining agreement did not cover statutory claims." Because the arbitrator in that case simply lacked the authority to resolve statutory claims, arbitration could not preclude a lawsuit on those claims. In Pyett, by contrast, the arbitrator did have such authority.

The Court did offer some limiting principles. First, its opinion suggests that the CBA must clearly empower the arbitrator to decide statutory claims in accordance with statutory requirements and must clearly state that the union is relinquishing the employees’ right to go to court on such claims. Respondents had made a number of arguments about the clarity of the CBA on this score, but these arguments had not been properly preserved. Second, the Court does not indicate how it would have ruled if the Union exercised its customary authority "to block arbitration of these claims." It noted that the record evidence was disputed and this issue "was not fully briefed to this or any court and is not fairly encompassed within the question presented…." Third, the Court made clear that any arbitration award was subject to judicial review (albeit limited) under the Federal Arbitration Act. Finally, the Court was unwilling to assume that the Union would not fairly represent unit employees in arbitration, noting that unions are subject to suit for breach of their duty of fair representation.

Careful drafting is called for in situations seeking to come within the rule of Pyett. Consideration should be given to who bears the costs of the proceeding, the scope of the union’s authority to control the proceeding, and the authority of the arbitrator. Employers should also remain aware of pending arbitration legislation in Congress that may, if enacted, substantially limit the holding in this case. 

This alert is intended to provide a brief synopsis of recent developments in the law and should not be construed as legal advice. For more information, please contact your Jones Day contact, Lawrence DiNardo at 1.312.782.3939, or Jacqueline Holmes or Sarah McClure, at 1.202.879.3939.