14 Penn Plaza LLC v. Pyett (U.S. Supreme Court Case No. 07-581) (Issued 4/1/09)
Can an individual employee be forced to arbitrate an employment discrimination claim (e.g. a Title VII complaint for race discrimination) where the employee is covered by an arbitration provision in a CBA or MOU that expressly covers such claims? If you had asked me this question yesterday I would have said absolutely not, citing to Alexander v. Gardner-Denver (1974) 415 U. S. 36 (Gardner-Denver). Today it’s different. That’s because of the Supreme Court’s decision in 14 Penn Plaza LLC v. Pyett issued on April 1st. At issue in 14 Penn Plaza was the following provision in a CBA between an employer and SEIU:
“§30 NO DISCRIMINATION. 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 (Articles V and VI) as the sole and exclusive remedy for violations. Arbitrators shall apply appropriate law in rendering decisions based upon claims of discrimination.”
The Court of Appeal, relying on Gardner-Denver, had ruled that the above provision was unenforceable. The Supreme Court reversed in a 5-4 decision authored by Justice Thomas and joined by Roberts, Scalia, Kennedy, and Alito.
The majority opinion first held that Gardner-Denver was not controlling since that decision did not involve an arbitration provision that expressly covered discrimination claims. After distinguishing Gardner-Denver, the Court went on to attack the “broad dicta” contained in the Gardner-Denver decision and argued that the dicta “rested on a misconceived view of arbitration that this Court has since abandoned.”
The majority opinion drew a dissent authored by Souter and joined by Stevens, Ginsburg and Breyer. According to the dissent, “The issue here is whether employees subject to a collective-bargaining agreement (CBA) providing for conclusive arbitration of all grievances, including claimed breaches of the Age Discrimination in Employment Act . . . lose their statutory right to bring an ADEA claim in court, §626(c). Under the 35-year-old holding in Alexander v. Gardner-Denver Co., 415 U. S. 36 (1974), they do not, and I would adhere to stare decisis and so hold today.”
1. This decision is huge. Gardner-Denver has been a foundational decision in labor law for over 35 years. It’s one of the first cases you read in any labor law class. For all those years, the dominant view has always been that under Gardner-Denver an individual employee’s statutory right to bring an employment discrimination claim in court trumped any arbitration provision in a union contract.
2. Given the significance of this decision, I was surprised that the dissent was so tame. I would have expected more fireworks. Perhaps the dissent was comforted by the fact that the majority decision rested on statutory interpretation of the NLRA and ADEA. Given the political make-up of Congress and the Presidency, the dissent may be thinking that there is a good chance this decision will be overturned.
3. In the meantime, I expect a rush among private sector employers to try to get provisions like the one in 14 Penn Plaza into their CBA’s. This is because private sector employers have never lost their love affair with binding arbitration, despite the hostility the courts have shown towards binding arbitration in the employment context.
4. I think the initial reaction among public sector employers will be the same. However, I think once public sector employers consider the pros and cons of such provisions, whether to pursue one will depend on individualized factors for each entity. For example, from a purely monetary standpoint, an employer would probably save money if all employment claims had to be arbitrated, but not necessarily so. Certainly, I think judgments would be lower with an arbitrator versus a jury. Attorneys fees would be lower, but not necessarily by much depending on how much discovery is allowed. However, assuming arbitration is cheaper than civil litigation more cases may go to arbitration than would have been filed in court. An example of this can be seen with the MMBA. Prior to PERB taking jurisdiction over the MMBA, few unions brought unfair practice charges in court because it was time-consuming and expensive. Now, with PERB providing an administrative remedy, far more unfair practice charges are being filed every year than were filed with the courts prior to PERB’s assumption of jurisdiction.
5. In addition, if the arbitration provision is structured such that a union has a duty of fair representation with respect to employment discrimination claims, I think far more claims would be arbitrated than would be litigated in court. This is because traditional plaintiff-side attorneys – who all work on contingency – only select the best cases. In contrast, if there was a duty of fair representation, I think a union would be forced to arbitrate some cases that a traditional plaintiff-side attorney would not take.
6. Finally, all this may be moot in California unless the California courts follow the lead of the Supreme Court. This is because most employment claims in California are brought under the Fair Employment and Housing Act since it is much broader than federal law. It is not at all clear whether California courts would follow the reasoning in 14 Penn Plaza with respect to FEHA claims. If the California courts didn’t go along, I think the effect of 14 Penn Plaza in California will be very limited.