U.S. Supreme Court Enforces Arbitration Clauses Regarding Discrimination Claims

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April 30, 2009

The U.S. Supreme Court recently handed employers a reason to consider bargaining for arbitration provisions. In 14 Penn Plaza LLC, et al. v Pyett et al., the court ruled that workers cannot sue over age discrimination claims when their collective bargaining agreement “clearly and unmistakably” requires arbitration of such claims.

The ruling on April 1, 2009, effectively reversed longstanding precedent, established in the 1974 Supreme Court decision in Alexander v. Gardner-Denver Co. The majority in the 5-4 Penn Plaza decision held that the facts in Gardner-Denver limited its application. The arbitration clause in that case applied only to contractual rights, not statutory rights, the Penn Plaza court found. 

The court concluded in Penn Plaza that the parties had bargained for such claims to go through arbitration and that the Age Discrimination in Employment Act does not prevent claims from being so resolved.

The employees in Penn Plaza sued under the ADEA, asserting that they had been reassigned to less desirable jobs because of age. The employer filed a motion to require them to utilize the grievance arbitration process set out in its collective bargaining agreement, including a clause prohibiting unlawful discrimination and listing the applicable anti-discrimination statutes, including the ADEA. The contract specified that alleged violations of the clause were subject to the grievance and arbitration process. The Supreme Court agreed with the employer, reversing a judgment by the U.S. Court of Appeals for the Second Circuit.

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Practice pointers:

  • If your collective bargaining agreement contains an anti-discrimination provision, consider adding a provision that clearly and unmistakably requires workplace discrimination and/or harassment claims to be arbitrated, rather than litigated. 
  • Unions may be warier of fair representation claims post-Penn Plaza. If arbitration is the only avenue for an employee to pursue discrimination or harassment claims, judges may scrutinize more closely a union’s decision not to take such a case to arbitration. 
  • Employees may still file charges with the Equal Employment Opportunity Commission and other relevant agencies. This case is not expected to affect claims at the agency level.

If you have any questions regarding this decision, please contact Brian D. Pedrow at 215.864.8108 or [email protected], Stephanie K. Deiger at 215.864.8664 or [email protected], or any member of the firm's Labor, Employment & Immigration Group.

Copyright © 2009 by Ballard Spahr Andrews & Ingersoll, LLP.

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