The U.S. Supreme Court Says That Union Members Cannot Sue For Discrimination Claims

Is mandatory arbitration the proper forum for resolution of discrimination claims for union members?

Supreme Court limits right of union workers to sue for discrimination
By John Burton, World Socialist Website, 10 April 2009
LINK

In a reactionary, pro-business ruling that reverses decades of settled law, the Supreme Court ruled 5 to 4 last week that workers lose their right to file federal discrimination lawsuits under the 1964 Civil Rights Act whenever a union collective bargaining agreement includes a mandatory arbitration clause.

Mandatory arbitration means that a party agreeable to the company rather than a federal court and jury will decide a dispute, and can do so without making findings of fact or explaining reasons for the decision. There is no right to an appeal, even where the arbitrator disregards the applicable law. Such clauses have become ubiquitous, as businesses insist on compelling arbitration to keep from being hauled in front of juries and forced to defend their actions.

With last week’s Supreme Court decision, it is now the rule that contracts negotiated by union bureaucrats trump federal laws enacted to protect against workplace discrimination.

The plaintiffs in the case, 14 Penn Plaza, LLC v. Pyett, were security guards represented by Service Employees International Union (SEIU) Local 32BJ, which had a collective bargaining agreement with a consortium of New York City commercial landlords. The contract contained a provision to force workers to arbitrate their federal discrimination claims along with alleged violations of the contract itself, such as seniority provisions and work rules.

The SEIU bureaucracy made a deal with a new contractor to replace the plaintiff security guards in the high-rise adjacent to Penn Station with lower-paid workers, which resulted in a grievance claiming violations of federal age discrimination laws as well as seniority rights. At the arbitration hearing, the SEIU withdrew the age discrimination claims because of a “conflict of interest”—namely, that the reassignments were made possible by the union’s own deal with the new contractor.

The transferred security guards then filed age discrimination suits in federal court against the landlords.

The Supreme Court dismissed the security guards’ lawsuit in a decision authored by Associate Justice Clarence Thomas, (pictured at right) joined by the three other members of the extreme right-wing bloc, Chief Justice John Roberts and Associate Justices Samuel Alito and Antonin Scalia. “Swing” Justice Anthony Kennedy, who invariably votes in favor of business interests, provided the crucial fifth vote.

As usual, the right-wing majority proceeded by working backward from its desired political conclusion to fashion its legal reasoning, in the process brushing aside any legal precedent standing in the way.

Thomas brushed aside Alexander v. Gardner Denver Co., which federal courts had been following for 35 years. In that case, a black worker filed a racial discrimination claim after his termination for “just cause” was upheld in a mandatory arbitration. The Supreme Court in 1974 rejected the employer’s argument that the worker could not pursue claims for workplace discrimination in federal court.

Associate Justice Lewis Powell, an appointee of Richard Nixon writing for a unanimous court, explained, “Parties usually choose an arbitrator because they trust his knowledge and judgment concerning the demands and norms of industrial relations. On the other hand, the resolution of statutory or constitutional issues is a primary responsibility of courts, and judicial construction has proved especially necessary with respect to [anti-discrimination laws], whose broad language frequently can be given meaning only by reference to public law concepts.”

This means that certain issues under the contract, such as those concerning seniority, are appropriate for an arbitrator, who is being asked to determine rights under the collective bargaining agreement itself. Disputes involving core civil rights, such as freedom from discrimination in the workplace, however, should be left to judges and juries.

As of last week, that is no longer the law.

Since 1974, American unions have evolved into little more than appendages of the employers. Even 35 years ago, however, the Supreme Court in Alexander recognized that “harmony of interest between the union and the individual employee cannot always be presumed,” and “the union may subordinate the interests of an individual employee” to its own interests.

As did reactionary judges during the first part of the twentieth century when striking down minimum wage and maximum work-hour regulations, Thomas in his decision exalted supposed “arm’s length” contract principles over laws enacted to protect workers’ rights. “As in any contractual negotiation, a union may agree to the inclusion of an arbitration provision in a collective bargaining agreement in return for other concessions from the employer. Courts generally may not interfere in this bargainedfor exchange,” Thomas wrote.

Thomas dismissed Alexander v. Gardner-Denver with the sophistry that the case stood only for the narrow principle that workers could not be forced to give up their right to be protected from discrimination in a collective bargaining agreement. According to Thomas, companies can still insist that workers give up their right to file lawsuits enforcing those rights.

Thomas’s argument flies in the face of the legal axiom that there can be no right without a meaningful remedy.

In a strongly worded dissent, Associate Justice John Paul Stevens, the senior member of the court’s liberal wing, denounced Thomas for his “subversion of precedent.” Associate Justices Ruth Bader Ginsburg, David Souter and Stephen Breyer also dissented.

Labor Management Relations
The Supreme Court Opens the Door to Mandatory Arbitration of Discrimination Claims for Union Members
April 2009
By:
Gavin S. Appleby
Hans Tor Christensen
Jennifer L. Mora

On April 1, 2009, a divided U.S. Supreme Court upheld the ability of an employer and a labor organization, as the employees' exclusive representative for purposes of collective bargaining, to agree that employees can be required to arbitrate their statutory employment discrimination or retaliation claims in accordance with an express requirement to do so under the terms of a bargained-for collective agreement. While the decision in 14 Penn Plaza L.L.C. v. Pyett specifically addressed age discrimination claims arising under a federal statute, the Court's decision is significant in that it now provides an opportunity for employers with unionized workforces to require that union members' discrimination and other statutory employment claims be privately arbitrated, rather than litigated in federal court. To get to that result, however, the relevant provision in the collective bargaining agreement must constitute a clear and unmistakable waiver of the right to pursue such claims in court.

Justice Thomas, writing for the majority, held that where the union and the employer have clearly and unmistakably agreed that statutory employment discrimination claims must be processed through the grievance and arbitration procedure in the parties' collective bargaining agreement, an employee will be required to file a grievance and ultimately submit the claim to a private arbitrator. Further, that employee will in most instances be barred from filing the same claims as a lawsuit in federal or state court.1 While there remain a number of unanswered questions about the 14 Penn Plaza decision, the Supreme Court clearly continues to consider arbitration a legitimate, if not preferred, method of dispute resolution.

Arbitration and Labor-Management Relations

Collective bargaining agreements set forth the terms and conditions of employment for employees in a bargaining unit where the union is the exclusive bargaining representative of those employees. Until the Supreme Court's decision in 14 Penn Plaza, it had been generally accepted that the parties could not include in those terms and conditions of employment a requirement that employees submit statutory claims of employment discrimination under federal or state employment statutes, such as Title VII and the Age Discrimination in Employment Act (ADEA), to the grievance and arbitration provisions in the applicable collective bargaining agreement.

As background, the Supreme Court's 1974 decision in Alexander v. Gardner-Denver Co.,2strongly suggested that both the prospective waiver of statutory employment claims as well as the ability to require arbitration of such claims were prohibited. Gardner-Denver seemed somewhat at odds with the Supreme Court's subsequent decision in Gilmer v. Interstate/Johnson Lane Corp.,3 in which the Court held that "an individual employee who had agreed individually to waive his right to a federal forum could be compelled to arbitrate a federal age discrimination claim." In short, an individual employee was free to agree to compulsory arbitration of age discrimination claims under Gilmer, but a labor organization was apparently prohibited under Gardner-Denver from agreeing in collective bargaining to a similar provision on behalf of the members it represents. It is against this backdrop that the Supreme Court was presented in 14 Penn Plaza with the opportunity to harmonize Gardner-Denver and Gilmer.

Factual Background



The employees at issue in 14 Penn Plaza were members of Local 32BJ of the Service Employees International Union (SEIU), which had the exclusive authority to bargain for and represent those employees regarding "rates of pay, wages, hours of employment, or other conditions of employment." The employer in the case, 14 Penn Plaza L.L.C., owned and operated an office building and was a member of the Realty Advisory Board (RAB), a multi-employer bargaining association. The collective bargaining agreement between the SEIU and RAB required union members to submit their claims for employment discrimination to binding arbitration in accordance with the grievance and arbitration procedures set forth in the applicable collective bargaining agreement. Specifically, the agreement stated:

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 ... as the sole and exclusive remedy for violations. Arbitrators shall apply appropriate law in rendering decisions based upon claims of discrimination.

14 Penn Plaza employed a variety of workers, including night watchmen. After a change in the existing subcontracting arrangement rendered the night watchmen's services unnecessary, the employees were reassigned to jobs as night porters and light-duty cleaners in other locations in the building. The employees claimed that this reassignment resulted in a loss of income and emotional distress.

The SEIU filed grievances on behalf of the employees claiming that the reassignments violated the collective bargaining agreement's prohibition against age discrimination and its seniority rules, and that the employer failed to equitably rotate overtime. Although the grievances ultimately proceeded to arbitration, the SEIU withdrew its claims of age discrimination, but it continued to arbitrate the seniority and overtime claims. In the meantime, the employees filed an administrative charge with the EEOC claiming that the reassignments violated the ADEA. The EEOC ultimately dismissed the employees' charge and provided them with a right-to-sue letter.

The employees then filed a lawsuit in federal district court alleging age discrimination under the ADEA and state law. The employer filed a motion to compel arbitration under the Federal Arbitration Act. However, the federal district court denied the motion and held that under existing precedent in the U.S. Court of Appeals for the Second Circuit, "even a clear and unmistakable union-negotiated waiver of a right to litigate certain federal and state statutory claims in a judicial forum is unenforceable."

The Second Circuit Concludes that Agreements to Arbitrate Contained in Individual Arbitration Agreements and Collective Bargaining Agreements Should Be Treated Differently

The Second Circuit refused to compel arbitration of the employees' ADEA claims based on its belief that the Supreme Court's decision in Gardner-Denver prohibited the parties to a collective bargaining agreement from "waiv[ing] covered workers' rights to a judicial forum for causes of action created by Congress." Although the Second Circuit recognized the tension between the Supreme Court's holding in Gardner-Denver and its more recent decision in Gilmer, the court attempted to reconcile the two decisions. Comparing individual rights to waive claims and arbitration provisions in a collective bargaining agreement, the court concluded that labor agreement provisions "which purport to waive employees' rights to a federal forum with respect to statutory claims, are unenforceable." In short, the Second Circuit considered individual arbitration agreements to be different from the grievance and arbitration provisions set forth in a negotiated collective bargaining agreement.

The Supreme Court Holds that Employees May Be Compelled to Utilize the Grievance and Arbitration Machinery Set Forth in a Collective Bargaining Agreement

The Supreme Court overruled the Second Circuit's analysis. The Court started with the general proposition that an agreement between an employer and a union to submit employment-related discrimination claims to arbitration qualifies as a condition of employment and is "no different from the many other decisions made by the parties in designing grievance machinery." Although the individual employees involved in the case argued that the arbitration clause was outside the permissible scope of collective bargaining because it affected "employees' individual, non-economic statutory rights," the Court rejected this contention. It instead found that the law "generally favor[s] arbitration precisely because of the economics of dispute resolution" and that, as a general matter, courts "may not interfere in this bargained-for exchange." The Court then reasoned that the collective bargaining agreement's requirement that employees arbitrate these types of disputes "must be honored unless the ADEA itself removes this particular class of grievances from the [National Labor Relations Act's] broad sweep." The Court then held that the ADEA did not contain such a prohibition.

The holding in 14 Penn Plaza is consistent with Gilmer. Once parties to a contract agree that a particular dispute must be submitted to arbitration, an employee is bound to that agreement "unless Congress itself evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Finding that there was nothing in the language or legislative history of the ADEA that expressly precluded arbitration, the Court concluded in Gilmer that arbitrating disputes under the ADEA would not undermine the statute's "remedial and deterrent function."4

In 14 Penn Plaza, the Court specifically stated that its earlier interpretation of the ADEA in Gilmer, which involved an individual employment agreement, "fully applies in the collective-bargaining context." As Justice Thomas explained, "[n]othing in the law suggests a distinction between the status of arbitration agreements signed by an individual employee and those agreed to by a union representative."

Further, Justice Thomas opined that Gardner-Denver was decided at a time when arbitration was perceived as insufficient for a fair and reasoned determination of federal statutory claims. Over 20 years later, however, a wide range of federal claims are commonly arbitrated, and objections centered on the abilities of arbitrators, or the nature of arbitration itself, are no longer justified. Thus, the Court held that to the extent Gardner-Denver concluded that arbitrators are not capable of fairly deciding complex federal discrimination claims, that precedent has been overturned. Nevertheless, the Court explicitly left in place the holding from Gardener-Denver that the waiver of a federal statutory employment claim that is not clear and unmistakable, will not be enforced. Thus "a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law." A labor agreement that is not so clear would not require compulsory arbitration.

Implications, Opportunities, and Other Issues

Generally speaking, few existing collective bargaining agreements will meet the standard required for a court to hold that employees have waived their rights to a judicial forum. In 14 Penn Plaza, the collective bargaining agreement: (1) contained an express prohibition against discrimination based on protected characteristics under federal, state, and local laws; (2) specifically named the statutes at issue; and (3) explicitly stated, "[a]ll such claims shall be subject to the grievance and arbitration procedures . . . as the sole and exclusive remedy for violations." Such a provision is relatively unusual in today's labor agreements. While most labor agreements contain antidiscrimination provisions, those provisions are not typically worded as a waiver clause. Given the specific language in the labor agreement in 14 Penn Plaza, however, the Supreme Court concluded that the SEIU and the employees it represented had met the high "clear and unmistakable" standard originally set forth in Gardner-Denver.

Technically, the Court's decision in 14 Penn Plaza is limited to claims arising under the ADEA, but ultimately it may be applied to a broad range of federal, state, and local employment statutes, provided that the text and legislative history of the applicable statutes do not expressly exclude the claims covered by the statute from compulsory arbitration. As a result, during bargaining, employers may want to consider whether they can benefit from requiring bargaining unit employees to submit their discrimination claims to arbitration and, if so, the nature and types of claims that should be covered. This is especially true for employers in jurisdictions that have been confronted with the onslaught of wage and hour class action litigation. Depending upon other laws and how they have been interpreted, restricting these types of claims to arbitration could provide protection to employers who are concerned about possible class actions.

Of course, it goes without saying that a union may not be willing to consider expanding the areas that a collective bargaining agreement's grievance and arbitration procedure covers, and hard bargaining and/or concessions may be needed to obtain this expansion. In fact, while unions have traditionally sought "antidiscrimination" language in labor agreements as part of their duty to push for employee rights, if a waiver of a jury trial is now part of the process, unions may quickly back off such a strategy.

A further, serious concern was raised by the dissent in 14 Penn Plaza ‑ where the union acts as a gatekeeper to its members' statutory employment claims, it may fail to pursue valid claims, to the detriment of the employees. While those employees may file a subsequent claim against their union for unlawful discrimination or breach of the duty of fair representation, the success of such claims is limited as unions have a meaningful amount of discretion as to which cases they choose to arbitrate.

Recommendations and Practical Considerations

With the above analysis in mind, there are numerous points for employers to consider:

1. Employers should not immediately conclude that the best strategy is to require that claims of discrimination be processed through the contractual grievance and arbitration process. For some employers, that will be the best answer; but other employers may decide that choosing to fight discrimination claims in court is a better strategy.
2. Arguments in favor of binding arbitration are factors such as cost savings (arbitration is almost always cheaper than litigation), less delay and less risk of punitive damages. Particularly in states where damages are not capped and where juries are considered more pro-employee, labor arbitration may indeed be the better option.
3. Binding arbitration, however, is not necessarily the best method for resolving these types of statutory claims. Arbitrators can be as unpredictable as juries, and the favored arbitration remedy of reinstatement can be more costly in a real sense than damages. Further, unfavorable arbitration decisions are extremely difficult to overturn. Even an arbitrator's "manifest disregard for the law" may not be a valid ground for appealing an arbitrator's ruling. By comparison, federal and state courts provide for a significantly more robust system of appeal.
4. Another factor to consider is the potential for obtaining summary judgment in discrimination cases. Some federal courts are amenable to granting summary judgment motions in such cases absent relatively clear evidence of direct or indirect discrimination. In other jurisdictions, by comparison, summary judgment is difficult to obtain.
5. Following the advent of punitive damages and jury trial rights created by the Civil Rights Act of 1991, compulsory arbitration became more common. Some employers that went in that direction, however, subsequently moved away from binding arbitration. Others continue to find that compulsory arbitration is better for them than litigation. In short, employers should not necessarily view 14 Penn Plaza as a bandwagon on which to jump. They should instead confer with experienced labor counsel and make a determination as to which road to go down. That determination will include such diverse factors as the relationship between the employer and the union, the pool of available arbitrators and their willingness to uphold reasonable employer decisions, the ability of the same arbitrators to understand the difference between a claim of discrimination and "just cause" in a discharge case, the general demeanor of judges and juries in the jurisdiction in question, and, of course, cost and employee morale. Capable labor counsel can provide an analysis of all these factors and more.
6. Finally, if an employer does decide to negotiate with a union to require compulsory arbitration of employment statutory rights, it should confer with labor counsel to create language that will likely be upheld under 14 Penn Plaza. Some courts will undoubtedly seek to restrict the Supreme Court's decision, so crafting language will be an important task. As noted earlier, congressional action could also lead to future restrictions that would have to be considered.

1 While this change is certainly significant in the labor-relations context, it likely will not prevent the Equal Employment Opportunity Commission (EEOC) or any other federal or state agency from filing a lawsuit against the employer on behalf of the employee. However, as a practical matter, that is a fairly rare event.

2 415 U.S. 36 (1974).

3 500 U.S. 20 (1991).

4 The Arbitration Fairness Act (AFA), recently introduced in Congress, would prohibit the enforcement of mandatory agreements that require employees to submit their statutory employment claims to binding arbitration. Should the 14 Penn Plaza decision inspire greater interest in the AFA, Congress could legislatively overrule the Supreme Court's 14 Penn Plaza and Gilmer decisions. Littler's DC Employment Law Update blog is tracking this legislation and other labor and employment-related developments in Washington.

Gavin S. Appleby is a Shareholder in Littler Mendelson's Atlanta office. Hans Tor Christensen is Of Counsel in Littler Mendelson's Washington, D.C. office. Jennifer L. Mora is an Associate in Littler Mendelson's Portland office. If you would like further information, please contact your Littler attorney at 1.888.Littler, info@littler.com, Mr. Appleby at gappleby@littler.com, Mr. Christensen at tochristensen@littler.com, or Ms. Mora at jmora@littler.com.

ASAP is published by Littler Mendelson in order to review the latest developments in employment law. ASAP is designed to provide accurate and informative information and should not be considered legal advice.
© 2009 Littler Mendelson. All rights reserved.

Employment Arbitration

An estimated 15% to 25% of employers nationally have adopted mandatory employment arbitration procedures. This means that more than 30 million employees (1 out of every 4 non-union workers) must sign a clause in their employment contract that gives up their right to go to court and, instead, permits an arbitration firm (of the employer’s choosing) to resolve any future disputes they have with their employer. Binding mandatory arbitration clauses allow employers to effectively remove themselves from the enforcement of employment rights laws. This should alarm every worker in the U.S.

The use of mandatory arbitration of employment claims has risen rapidly since the early 1990s – after Congress made jury trials and money damages available under Title VII (in 1991), the passage of the Americans with Disabilities Act in 1992, and the number of discrimination charges filed skyrocketed. 1991 was also the year in which the Supreme Court upheld imposition of mandatory arbitration of an age discrimination claim.

Here’s how mandatory arbitration has affected Fonza Luke of Alabama:

Fonza Luke, a mother of four and a grandmother, started working as a licensed nurse practitioner for Baptist Health Systems (BHS) at its Medical Center in 1971. In November 1997, Fonza was told she must sign the new “Dispute Resolution Program,” which meant employees would have to go into arbitration if they had legal claims. Fonza did not want to forfeit her rights, so despite being told twice that she would be fired if she did not sign the agreement, she refused to sign it. Three years later, the hospital fired Fonza due to “insubordination” after almost 30 years of working for BHS with only the highest performance ratings. As a 59-year-old African-American woman, Fonza believed she was fired due to her race and age, so she filed claims with the U.S. Equal Employment Opportunity Commission and then in federal court. Even though she never signed anything, BHS asked the federal court to dismiss her case to arbitration. The federal court said that BHS could force her to arbitrate because she kept working in her job after they showed her its arbitration agreement. When she appealed the federal court’s decision, the appeals court ordered her into arbitration, where she lost completely. According to her lawyer, it was impossible for Fonza to get an arbitrator that was fair and unbiased, much less pro-employee. As a result, her claims of discrimination and retaliation were denied, and she got no relief whatsoever.