Should Unionized Employers Consider Mandatory Arbitration of Discrimination Claims Under Their Labor Agreements?
August 13, 2009
Earlier this year, the United States Supreme Court held that a provision in a collective bargaining agreement that requires workers to grieve and arbitrate claims based on anti-discrimination statutes, and thereby waive their rights to sue such claims in court, is enforceable, if it clearly and unmistakably requires union members to arbitrate such claims. 14 Penn Plaza LLC v. Pyett. Critical to the court's holding was the fact that the arbitration clause before it explicitly covered statutory discrimination claims and required the arbitrator to apply the relevant statutory and case law in resolving such claims
The Court's decision creates an opportunity for unionized employers to evaluate whether mandatory arbitration of discriminating claims is a prudent strategy given the conditions facing their businesses. This is not a simple analysis. It requires evaluation of the potential cost and time savings from arbitration, the advantages and disadvantages of having an arbitrator as opposed to a jury decide the case, and the vastly different standards of review on appeal from the two types of decisions.
If an employer decides that it is more advantageous to use a system of mandatory arbitration, it is likely that the employer will have to negotiate changes to the arbitration clause in its current collective bargaining agreement. Many labor agreements have routine non-discrimination clauses and provide for arbitration of all disputes arising under the agreement. Such clauses are not likely to satisfy the Supreme Court's clear and unmistakable standard for mandatory arbitration of discrimination claims. The agreement in 14 Penn Plaza which was sufficient: prohibited discrimination under specifically named statutes; explicitly stated that the grievance and arbitration process was the sole and exclusive method for resolving such claims; and authorized and directed the arbitrator to apply statutory law in resolving discrimination claims.
Obtaining union agreement to such a clause is likely to be more difficult going forward. Prior to the 14 Penn Plaza decision, unions risked very little in agreeing to such clauses because federal courts had interpreted a much earlier Supreme Court decision, Alexander v. Gardner-Denver Co., as making such clauses ineffective as waivers of the rights of individual union members. Now unions will face substantial burdens if they agree to clear and unmistakable provisions. Unions are not likely to have at their disposal much experience or expertise in the area of litigating statutory discrimination claims. Even if they have that expertise, they may be unwilling to incur the substantial risk of and expense associated with defending breach of the duty of fair representation claims which could be brought by union members who are dissatisfied with the way the union handled their discrimination claims.
Before attempting to negotiate a clear and unmistakable mandatory arbitration provision, employers should also consider that the 14 Penn Plaza decision faces a potential challenge in Congress where the Arbitration Fairness Act is pending. That bill would prohibit enforcement of pre-dispute agreements that mandate arbitration of statutory employment claims, including discrimination claims under the civil rights law. While the House version of the bill exempts collective bargaining agreements, the more recent Senate version would apply to them as well and would overrule 14 Penn Plaza.