As those of you who follow arbitration know, 14 Penn Plaza v. Pyett raised the age-old question whether a union can waive an individual employee’s right to bring a statutory claim in court by mandating that statutory claims be arbitrated through a clause negotiated in a collective bargaining agreement (“CBA”). The issue was initially resolved in 1974, in Alexander v. Gardner-Denver, when the Court held that a CBA arbitration clause did not require an employee to bring his race discrimination claim through the arbitration process.

Well, unlike the union and employer in Gardner-Denver, who drafted a CBA that only required arbitration of contractual claims, today’s unions and employers sometimes (although not frequently) negotiate an arbitration clause that requires arbitration of both contractual and statutory claims. It was this type of clause that was at issue in Pyett. As I said yesterday, the majority, in a 5-4 decision, held that unions and employers can waive the rights of individual employees to bring their ADEA claims in court if the parties “clearly and unmistakably” indicate that it is their collective wish to do so. Here are my thoughts on the case so far:

The most controversial issue is the question whether Alexander v. Gardner-Denver remains good law following the Pyett decision. According to the majority, Gardner-Denver is distinguishable because the CBA in that case covered only contractual issues while, in Pyett, the CBA’s arbitration provision “expressly covers both statutory and contractual discrimination claims.”
In addition, the Court held that submission of statutory claims to arbitration was not a prospective waiver of federal anti-discrimination rights; rather it was just a change in forum. This conclusion was unsurprising because the Court has frequently stated that mandatory arbitration clauses are simply agreements to adjudicate claims in a different forum. The Court also rejected the argument that, in some way, arbitration is second class justice. According to the Court, “[a]n arbitrator’s capacity to resolve complex questions of fact and law extends with equal force to discrimination claims brought under the ADEA.”
Perhaps the most surprising conclusion in the opinion was the Court’s rejection of the argument that, in the collective bargaining process and, ultimately in the grievance process, the union might subordinate the interests of an individual employee to the collective interests of all employees in the bargaining unit. The Court sharply rejected this argument and noted (as I noted in an article about ten years ago) that the union’s duty of fair representation and its potential liability under the ADEA should it discriminate against its own members, are sufficient to counter any tendency the union might have to sell out an individual employee.
Finally, the Court reiterated that a CBA agreement must clearly and unmistakably require union members to arbitrate ADEA claims before will be enforceable. That was the holding in Wright v. Universal Maritime Services. It is not surprising that the Court would confirm that the clear and unmistakable requirement is still present. Unfortunately, the Court was unable to determine whether the CBA at issue in the case satisfied the “clear and unmistakable” standard because the “respondents did not raise these contract-based arguments” in the lower courts. While unions and employers may clearly and unmistakably require union members to arbitrate ADEA claims, it is not clear what the standard governing the interpretation of “clear and unmistakable” is.
Although the dissent took issue with a number of the points the majority made, the clearest conflict was the dissent’s view that the majority overruled Gardner-Denver by incorrectly ignoring stare decisis in order to implement its own view of what the federal policy on arbitration is. Noting that the Court’s job is to follow precedent and Congress’s job is to change policy, the dissent criticized both the majority’s efforts to distinguish Gardner-Denver as well as its failure to follow the Gardner-Denver holding.

A couple of thoughts . . . First, the question of what constitutes a “clear and unmistakable waiver”, as the dissent points out, is still an open question because the parties did not raise the issue on appeal (I am curious about why they did not do so). Second, this holding may ultimately not have a major effect in practice because most employers do not seek to have a clause like this put into collective bargaining agreements. Third, if the Arbitration Fairness Act passes, it would not surprise me to see a subsequent effort to overturn the Pyett decision.

Ross Runkel at www.lawmemo.com/arbitrationblog also made an interesting and important observation about the case: “The employees argued that the CBA allows the union to block arbitration of these claims altogether, thus operating as an unlawful substantive waiver of federal civil rights claims. The employers countered by arguing that the union has allowed employees to continue with the arbitration even though the union declined to participate. The Court specifically avoided reaching this issue because it was not fully briefed and was not fairly within the question presented to the Court. This clearly leaves a lot to be decided.

It could be that if the union retains total control over the arbitration process (which is normal in most cases), and if the union declines to arbitrate the individuals’ statutory claims, then the employees would be able to proceed in litigation.”