U.S. Supreme Court Enforces Agreement to Arbitrate Discrimination Claims in 14 Penn Plaza v. Pyett

This week, the U.S. Supreme Court decided (5-4) 14 Penn Plaza v. Pyett, No. 07-581, (U.S. Apr. 1, 2009). Justice Thomas delivered the opinion of the Court, joined by Chief Justice Roberts and Justices Scalia, Kennedy, and Alito. Justice Stevens filed a dissenting opinion. Justice Souter filed a dissenting opinion as well, joined by Justices Ginsburg and Breyer.

Respondents are employed as night lobby watchmen and are members of the Service Employees International Union (Union) which, pursuant to the National Labor Relations Act (NLRA) has the exclusive authority to bargain for their “rates of pay, wages, hours of employment, or other conditions of employment.” Petitioner 14 Penn Plaza LLC owns and operates the New York City office where respondents worked and is a member of the Realty Advisory Board on Labor Relations, Inc. (RAB), a multiemployer bargaining association for the New York real-estate industry. Petitioner Temco Service Industries, Inc. (Temco) is a maintenance and cleaning contractor that employed the respondents directly. The agreement between the Union and the RAB requires union members to submit all claims of employment discrimination to binding arbitration.

14 Penn Plaza, with the Union’s consent, contracted with Temco for security guards for its building. However, Temco re-assigned respondents to jobs as night porters and cleaners. Based on this re-assignment of duties, respondents claim workplace discrimination on the basis of their age and sued in district court. The District Court denied petitioners’ motion to compel arbitration and petitioners appealed. The Second Circuit affirmed here and the U.S. Supreme Court granted certiorari.

The issue resolved by the Court is whether a provision in a collective-bargaining agreement that clearly and unmistakably requires union members to arbitrate claims arising under the Age Discrimination in Employment Act (ADEA) is enforceable.

Respondents argued that “the arbitration clause here is outside the permissible scope of the collective-bargain process because it affects the ’employees’ individual non-economic statutory rights.’ ” The Court reasoned that the agreement between the Union and the RAB “easily qualifies as a ‘condition of employment’ that is subject to mandatory bargaining” and stated that “Courts generally may not interfere in this bargain-for exchange.”

The Court rejected respondents’ claim that “an individual employee must personally ‘waive a ‘(substantive right)’ to proceed in court for a waiver to be ‘knowing and voluntary’ under the ADEA.” The Court explained that the agreement to arbitrate ADEA claims is not a waiver. The Court affirmed that “the unsuccessful arbitration did not preclude the federal lawsuit. ” At the same time, the Court stated that “the decision to resolve ADEA claims by way of arbitration instead of litigation does not waive the statutory right to be free from workplace age discrimination; it waives only the right to seek relief from a court in the first instance.”

The Court also tried to resolve the tension between the holdings in Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974) and Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). It emphasized that Gardner-Denver and its progeny have “narrow holdings” and are of “narrow scope.” The Court explained that in that case, the Court had “reversed the judgment on the narrow ground that the arbitration was not preclusive because the collective-bargaining agreement did not cover statutory claims.” Next, the Court praised the benefits of arbitration and explained that the broad dicta in those cases “rested on a misconceived view of arbitration that this Court has since abandoned.”

Finally, the Court held that the arbitration provision is enforceable as a matter of federal law.

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