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Legal Update

The US Supreme Court Releases Opinion in 14 Penn Plaza LLC v. Pyett

2 April 2009
Mayer Brown Legal Update

On April 1, 2009, the US Supreme Court released its opinion in 14 Penn Plaza LLC v. Pyett, No.07-581 (previously discussed in February 19, 2008 Docket Report).

In Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), the Supreme Court allowed a discharged employee to bring an employment-discrimination claim in federal court even though he had already engaged in arbitration of the claim under his union’s collective bargaining agreement. In the years that followed, a number of courts construed Gardner-Denver and subsequent cases to preclude a union from agreeing, through a collective bargaining agreement on behalf of its members, that the members would pursue statutory employment discrimination claims in arbitration rather than in court. Today, in 14 Penn Plaza LLC v. Pyett, No. 07-581, the Supreme Court held that a provision in a collective bargaining agreement that explicitly requires union members to arbitrate claims arising under the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. § 621 et seq., is enforceable.

In Pyett, union members who had been reassigned to less desirable jobs at the office building where they worked brought an age discrimination suit in federal court. Under the terms of the applicable collective bargaining agreement (CBA), union members were required to submit claims of employment discrimination—including ADEA claims—to arbitration. Invoking the Federal Arbitration Act, the defendants petitioned the district court to compel arbitration of the plaintiffs’ age discrimination claims. The district court denied the petition, and the Second Circuit affirmed. The court of appeals held that, under the Gardner-Denver line of cases, an arbitration agreement contained within a collective bargaining agreement cannot be enforced to require an individual worker to arbitrate federal employment discrimination claims rather than pursue those claims in a judicial forum. The Supreme Court granted certiorari to resolve a circuit conflict over “whether a provision in a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate claims arising under [the ADEA] is enforceable.” Slip op.1.

In an opinion by Justice Thomas, a five-Justice majority of the Supreme Court held that such a provision is enforceable. The Court first explained that the arbitrability of employment discrimination claims is a “condition of employment” within the scope of the union’s collective bargaining authority under the National Labor Relations Act (NLRA). Thus, the Court reasoned, “the CBA’s arbitration provision must be honored unless the ADEA itself removes this particular class of grievances from the NLRA’s broad sweep.” Slip op. 8. Noting that it had already held, in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), that the ADEA does not preclude the arbitration of an employee’s ADEA claim pursuant to an individual employment contract, the Court then concluded that the ADEA likewise does not bar arbitration in the collective bargaining context. Because the NLRA gives the union and the employer the authority to negotiate an arbitration provision, and because the ADEA does not abrogate that authority, the Court found “no legal basis . . . to strike down the arbitration clause in this CBA.” Slip op. 10.

The Court went on to hold that the Gardner-Denver line of cases did not require a different result. The Court explained that those cases did not squarely address the enforceability of an agreement to arbitrate statutory claims, but instead examined whether the prior arbitration of contract-based claims precluded subsequent litigation of statutory claims. The Court also disavowed “broad dicta” in Gardner-Denver that was “highly critical of the use of arbitration for the vindication of statutory antidiscrimination rights,” pointing out that such skepticism “rested on a misconceived view of arbitration that this Court has since abandoned.” Slip. op. 16.

In a dissenting opinion joined by Justices Stevens, Ginsburg, and Breyer, Justice Souter argued that the question presented in the case was controlled by Gardner-Denver. Justice Stevens wrote a separate dissent, expressing concern about what he termed the “subversion of precedent to the policy favoring arbitration.” Slip op. 1 (Stevens, J., dissenting).

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