14 Penn Plaza LLC v. Pyett: Employers Can Require Their Union Employees To Arbitrate Age Discrimination Claims Through a Collective Bargaining Agreement

In 14 Penn Plaza LLC v. Pyett (April 1, 2009) the United States Supreme Court upheld a collective bargaining agreement's (“CBA”) arbitration provision which required members of a union to submit age discrimination claims to binding arbitration.

The Pyett Decision

The National Labor Relations Act (“NLRA”) grants employees the right to unionize and is meant to, among other things, facilitate the collective bargaining between employers and unions with regards to work conditions and wages. Pursuant to the NLRA, a selected union becomes the exclusive bargaining representative of employees within a particular field of work. An arbitration agreement prevents an aggrieved party from filing specified claims in civil court, and instead requires the party to pursue their claim through a neutral arbitrator. Arriving at arbitration arrangements is among the many goals of collective bargaining under the NLRA.

In Pyett, the employer and union mutually agreed to include a provision in a CBA requiring that all claims of employment discrimination, including claims under the Age Discrimination in Employment Act (“ADEA”), “be subject to the grievance and arbitration procedures [of the collective bargaining agreement] as the sole and exclusive remedy for violations.” Aggrieved union members filed a suit under the ADEA in federal court—in direct conflict with the express terms of the CBA.

The Supreme Court held that the arbitration provision was enforceable against the union members. First, the Court noted that a fundamental policy of the NLRA is to promote freedom of contract. Therefore, the CBA's arbitration provision should have been upheld, unless the statute from which the aggrieved party's claims arose (i.e. the ADEA) had removed itself from the NLRA's scope. In the case of the ADEA, the Court held that there was nothing to suggest that ADEA claims were removed from the NLRA's broad sweep. In addition, the Court found that prior court decisions that found a CBA's arbitration provision unenforceable against discrimination claims, were based on the archaic and erroneous assumption that such agreements equated to a waiver of the substantive rights provided by antidiscrimination laws—the right to be free from discrimination. The Pyett Court held that an arbitration agreement does not waive substantive rights, instead it waives only the right to seek relief from a court. In addition, the Court noted that an arbitrator could resolve discrimination claims just as capably as a judge and thus there was no reason why the union and employer could not agree to require arbitration of ADEA claims.

What Employers Should Know

The Pyett decision vests employers of unionized employees with considerable authority to enforce a CBA's arbitration agreement. Although Pyett's facts were limited to ADEA claims, the Court's ruling could potentially require arbitration of any claims that fall within the NLRA's broad scope. Because arbitration can save an employer considerable amounts of money and resources, employers with unionized employees should consult with legal counsel to assist them in drafting an enforceable arbitration agreement.