Jump to Navigation


Supreme Court Ruling - a Victory for Employers - Both Unionized and Union-Free

April 13, 2009

In a 5-4 ruling, the U.S. Supreme Court has held that a collective-bargaining agreement that “clearly and unmistakably” requires union members to arbitrate ADEA claims is enforceable.  The case, 14 Penn Plaza LLC v. Pyett, No. 07-581, is the latest in a string of decisions by the Court favoring arbitration of workplace disputes. However, employers must remain vigilant regarding pending legislation currently moving through Congress that could impact their ability to use arbitration as an alternative to litigation. Information on that proposed law, The Arbitration Fairness Act of 2009, is covered in this update.

SEIU Employees Brought the Lawsuit

The employees who brought the lawsuit are members of the Service Employees International Union (SEIU). They were employed by Temco Service Industries, a maintenance service and cleaning contractor, to work as night watchmen at an office building owned by 14 Penn Plaza LLC. As a member of a multi-employer bargaining association, 14 Penn Plaza was bound by the association’s collective bargaining agreement (CBA) with the SEIU. Among its provisions, the CBA explicitly required union members to submit all claims of employment discrimination – whether based on the CBA or a specific statute – to binding arbitration.

SEIU Withdraws Claims; Workers Then File Age Discrimination Charges

With the SEIU’s consent, Temco subsequently replaced the employees with licensed security guards. Temco then reassigned the employees to less desirable jobs. The SEIU first grieved the reassignments and later requested arbitration, alleging, among other things, age discrimination. The union, however, thereafter concluded that its consent to Temco’s hiring of licensed guards precluded it from now arguing that the employees’ reassignments were discriminatory, and it withdrew the workers’ age bias claims. The employees then filed age discrimination charges with the Equal Employment Opportunity Commission.

Appellate Court: Union Can't Waive Employees' Statutory Rights

When the case reached a federal trial court in New York, the companies and the realtors’ association sought to compel arbitration under the CBA. The court’s refusal to grant this request was later affirmed by the U.S. Court of Appeals for the Second Circuit. The appeals court held that Supreme Court precedent, as previously interpreted by the Second Circuit, prohibited enforcement of CBA provisions requiring arbitration of ADEA claims. In other words, the union could not waive the employees’ statutory right to seek redress for the alleged violation of the law.

Split Supreme Court Disagrees with Appellate Court

Disagreeing with the appellate court, a split Supreme Court held that the provision in the CBA subjecting all discrimination claims to arbitration, including both statutory claims and those arising under the agreement, was sufficiently clear and specific, and therefore, enforceable.  In an opinion authored by Justice Thomas, the majority distinguished earlier, seemingly contradictory cases on the ground that, unlike here, those cases involved vague arbitration clauses that did not expressly specify that the particular statute at issue was covered by the provision. The four dissenting Justices sharply disagreed with this conclusion and accused the majority of disregarding clear precedent.

The Bottom Line

The Court’s ruling is a victory for employers – both unionized and union-free – who prefer to resolve employment disputes through arbitration. The decision, however, underscores important steps employers should take to ensure the validity of a stand-alone arbitration agreement, or an arbitration provision in a CBA or employment contract. These measures include:

  • Ensuring that the agreement is written in “clear and unmistakable” language. Any ambiguities may be interpreted by a court or arbitrator contrary to the employer’s intent or interests; and
  • Expressly delineating the scope of the agreement’s coverage. In this regard, it may be desirable to provide that the agreement subjects to arbitration all employment disputes arising under (for example) Title VII of the Civil Rights Act, the ADEA, the Americans with Disabilities Act, etc., as well as all similar federal, state and local laws, rules and regulations.

Employers Must Remain Vigilant Regarding Pending Legislation

Notwithstanding this favorable ruling, employers should be aware that their ability to use arbitration as an alternative to litigation will be severely restricted if legislation recently introduced in Congress is passed. That proposed law, The Arbitration Fairness Act of 2009, would make pre-dispute employment (and consumer) arbitration agreements unenforceable. Under the measure, an agreement to arbitrate an employment dispute would be lawful only if it were agreed to by the employee after the dispute arose. The bill, H.R. 1020, is available at http://www.opencongress.org/bill/111-h1020/text.