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1-1-2008

When Can a Collective Bargaining AgreementWaive Union Members' Rights to a Judicial Forum?Jay E. GrenigMarquette University Law School, jay.grenig@marquette.edu

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Publication InformationJay E. Grenig, When Can a Collective Bargaining Agreement Waive Union Members' Rights to aJudicial Forum?, 36 Preview U.S. Sup. Ct. Cas. 152 (2008). © 2008 American Bar Association. Thisinformation or any portion thereof may not be copied or disseminated in any form or by any meansor downloaded or stored in an electronic database or retrieval system without the express writtenconsent of the American Bar Association.

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Repository CitationGrenig, Jay E., "When Can a Collective Bargaining Agreement Waive Union Members' Rights to a Judicial Forum?" (2008). FacultyPublications. Paper 449.http://scholarship.law.marquette.edu/facpub/449

ISSUEHave employees whose union agreedwith their employers that arbitra-tion was “the sole and exclusiveremedy for violations” of the AgeDiscrimination in Employment Act(ADEA) waived the right to a judi-cial forum for alleged violations ofthe ADEA, even when the unioncontrols access to the arbitrationand refuses to submit the employ-ees’ grievances to arbitration?

FACTSThe respondents are employees ofTemco Services Industries, a build-ing service and cleaning contractor.Before August 2003, the respon-dents worked as night watchmen ina commercial office building ownedby Pennsylvania Building Companyand 14 Penn Plaza LLC. Since thattime, the respondents have beenworking as night porters and light-duty cleaners in the same building.

Respondents are also members ofLocal 32BJ of the ServiceEmployees International Union.They are covered by the collectivebargaining agreement between theunion and the Realty AdvisoryBoard on Labor Relations, Inc., themultiemployer bargaining associa-tion of the New York City real estateindustry. The collective bargainingagreement contains a mandatoryarbitration clause for discriminationclaims, which provides as follows:

There shall be no discriminationagainst any present or futureemployee by reason of race,creed, color, age, disability,national origin, sex, union mem-bership, or any characteristicprotected by law, including, butnot limited to, claims made pur-suant to Title VII of the CivilRights Act, the Americans withDisabilities Act, the AgeDiscrimination in EmploymentAct, the New York State HumanRights Law, the New York CityHuman Rights Code, New JerseyLaw Against Discrimination, NewJersey Conscientious Employee

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PREVIEW of United States Supreme Court Cases, pages 152–157. © 2008 American Bar Association.

Case at a

Glance

Case at a

Glance

A R B I T R A T I O N

When Can a Collective Bargaining Agreement Waive Union Members’

Rights to a Judicial Forum?by Jay E. Grenig

Jay E. Grenig is a professor of lawat Marquette University Law

School in Milwaukee, Wisconsin.Professor Grenig is the author

of Alternative Dispute Resolution, published by

ThomsonReuters/West. He is amember of the National Academyof Arbitrators. He can be reached

at jgrenig@earthlink.net or (414) 288-5377.

14 PENN PLAZA LLC ET AL. V.PYETT ET AL.

DOCKET NO. 07-581

ARGUMENT DATE:DECEMBER 1, 2008

FROM: THE SECOND CIRCUIT

When their union

refused to take their

discrimination claims to

arbitration, several

employees filed age

discrimination lawsuits

against their employers

instead. The employers

then sought to compel

the employees to submit

their discrimination

claims to arbitration or

to have the lawsuits

dismissed. The Supreme

Court is now asked to

decide whether

employees covered by a

collective bargaining

agreement’s arbitration

clause must arbitrate

their statutory

discrimination claims

even if their union has

declined to take their

claims to arbitration.

American Bar Association

Protection Act, Connecticut FairEmployer Practices Act, or anyother similar laws, rules or regu-lations. All such claims shall besubject to the grievance and arbi-tration procedure (Articles V andVI) as the sole and exclusive rem-edy for violations. Arbitratorsshall apply appropriate law inrendering decisions based uponclaims of discrimination.

In August 2003, Temco contractedwith Spartan Security, a securityservices contractor and affiliate ofTemco, to provide certain securitypersonnel, including night watch-men, for the building. Spartanbrought in new employees.Respondents, who had beenemployed as night watchmen, werereassigned to different locations andless desirable positions as nightporters and light-duty cleaners with-in the building.

The respondents filed grievanceswith the union under the collectivebargaining agreement. The respon-dents claimed that, as the onlybuilding employees over the age of50, they were wrongfully transferredand denied overtime in violation ofvarious provisions of the collectivebargaining agreement, including theprovision that prohibited discrimi-nation on the basis of age. Therespondents’ grievances were sub-mitted to arbitration. Shortly afterthe arbitration began, the uniondeclined to pursue the respondent’sclaims of wrongful transfer and agediscrimination, electing to pursueonly the claims regarding denial ofovertime on behalf of all plaintiffsand wrongful denial of promotion onbehalf of respondent Steven Pyett.According to the respondents, theunion’s counsel explained to themthat “since the Union had consent-ed to Spartan Security beingbrought into the building,” theunion could not contest theirreplacement as night watchmen by

personnel of Spartan Security. OnAugust 10, 2005, the arbitratorissued his award, denying respon-dents’ arbitrated claims in theirentirety.

On May 26, 2004, while the arbitra-tion was ongoing, but after theunion declined to submit the agediscrimination claims, the respon-dents filed charges of discriminationwith the Equal EmploymentOpportunity Commission. TheEEOC issued a Dismissal and Noticeof Rights on June 29, 2004, forrespondents Thomas O’Connell andMichael Phillips, and on September14, 2004, for respondent Pyett. Ineach case, the EEOC determinedthat its “review of the evidence ...fail[ed] to indicate that a violationha[d] occurred,” and notified eachrespondent of his right to sue. OnSeptember 23, 2004, respondentscommenced this action against thepetitioners in district court, pursu-ing those claims that the union didnot submit to arbitration. Therespondents alleged that they hadbeen transferred from their posi-tions and replaced by younger secu-rity officers in violation of the AgeDiscrimination in Employment Act,the New York State Human RightsLaw, and the New York CityAdministrative Code.

The petitioners moved for dismissalfor failure to state a claim uponwhich relief can be granted and, inthe alternative, to compel arbitra-tion. In an order dated May 31,2006, the district court denied bothmotions. With respect to petitioners’motion to compel arbitration, the district court referred to itsdecision in Granados v. HarvardMaintenance, Inc., 2006 WL435731 (S.D.N.Y. Feb. 22, 2006). Inthat case, the district court “con-cluded based largely on bindingSecond Circuit precedent that evena clear and unmistakable union-negotiated waiver of a right to liti-

gate certain federal and state statutory claims in a judicial forum is unenforceable.” Pyett v.Pennsylvania Building Co., 2006WL 1520517, *3 (S.D.N.Y. June 1,2006).

Affirming the district court, the U.S. Court of Appeals for theSecond Circuit held that the arbitration clauses in the collectivebargaining agreements were unen-forceable to the extent that theywaived the rights of covered work-ers to a judicial forum for federalstatutory causes of action. Pyett v.Pennsylvania Building Co., 498F.3d 88 (2d Cir. 2007).

The Supreme Court granted peti-tioners’ request for request forreview. 128 S.Ct. 1223 (2008).

CASE ANALYSISThe petitioners assert that the arbi-tration provision in this case is anenforceable and “clear and unmis-takable” waiver of the respondentunion members’ right to a judicialforum. The petitioners say that theunion, as the respondents’ exclusivebargaining representative, wasauthorized and entitled to bargainover all terms and conditions oftheir employment. According to thepetitioners, the respondents weregiven an unimpeded opportunity toarbitrate their claims, which theyrefused in favor of filing a federallawsuit, contrary to the requirementin the collective bargaining agree-ment. The petitioners claim the“Second Circuit’s judicial voiding ofthe arbitration provision floutsrepeated decisions from [theSupreme] Court that agreements toarbitrate statutory claims areenforceable unless Congress itselfhas evinced an intention to pre-clude a waiver of judicial remediesfor the statutory rights at issue.”

The petitioners assert that it is afundamental premise of labor law

(Continued on Page 154)

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that a union has the power to nego-tiate agreements with the employeras to virtually every aspect of itsmembers’ employment and thatthose agreements are as binding onthe employees as if they had negoti-ated them themselves. The petition-ers claim that the fact that anemployee has a statutory discrimi-nation theory as well as a contracttheory for seeking recovery does notalter the union’s bargaining authori-ty. They say it is appropriate for aunion to bargain collectively overthe method of resolving such claimsin exchange for valuable conces-sions. According to the petitioners,the Second Circuit’s categorical bannot only cuts against the nationalpolicy favoring informal resolution ofworkplace disputes, but also under-mines the role of the union in nego-tiating on behalf of its members.

Asserting there is no evidence thatCongress ever distinguishedbetween promises to arbitrate statu-tory discrimination claims based onwhether the promises were individ-ually made or collectively bar-gained, the petitioners contend thatthe Second Circuit’s distinction cre-ates perverse results. They say thatarbitral arrangements are muchmore likely to be advantageous toemployees when they are collective-ly bargained. If unions cannot makesuch promises, petitioners argue,such a term of employment wouldbecome a nonmandatory subject ofbargaining that the employer couldimpose on employees while simplybypassing the union.

According to the petitioners, theSecond Circuit’s reliance onAlexander v. Gardner-Denver Co.,415 U.S. 36 (1974), cannot be sus-tained. The petitioners assert that,contrary to the Second Circuit’sview, Gardner-Denver decidednothing about whether clear collec-tively bargained promises to arbi-trate statutory discrimination claims

are categorically unenforceable. Thepetitioners view Gardner-Denver asholding only that an arbitrator’s res-olution of a contractual claim doesnot preclude a statutory claimunder Title VII when the parties hadnot expressly agreed to arbitrate thestatutory claim and the arbitratortherefore had no power to decide it.Petitioners say that Gardner-Denver did not address whetherCongress had intended to precludeemployers from invoking theFederal Arbitration Act to compelarbitration when, as in the presentcase, the employees’ union hadclearly agreed on behalf of its mem-bers that all their statutory discrimi-nation claims would be arbitratedwith the arbitrators applying appro-priate law and remedies.

The petitioners stress that collectivebargaining agreements may waiveindividual rights if they expressly soprovide. They state that speculativerisks that certain statutory goalsmay be disserved (e.g., the risk thata union might subordinate theemployee’s interest in his or herown claim to the union’s interests)are insufficient as a matter of law todefeat a motion to compel arbitra-tion under the Federal ArbitrationAct.

Disagreeing with the petitioners, therespondents contend the SupremeCourt has repeatedly held that aunion-controlled arbitration agree-ment does not preclude an individ-ual employee from pursuing his orher statutory anti-discriminationclaims in court. They argue thatthese Supreme Court decisionsproperly recognize that, in a union-controlled arbitration process, anemployee is unable to vindicate theemployee’s individual, substantivestatutory anti-discrimination rights.

According to the respondents, the Supreme Court’s holding inGardner-Denver, that a union can-

not waive an employee’s right to ajudicial forum under the federalanti-discrimination statutes, appliesdirectly to this case. Respondentsalso say that in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20(1991), the Court reiterated theconcern expressed in Gardner-Denver that allowing the union towaive this right would substitute theunion’s interests for the employee’santi-discrimination rights.

The respondents claim that thosedecisions are consistent with thelimited legal powers conferred onunions by federal statute. Althougha union is authorized to waiveemployees’ collective rights in orderto further self-governance betweenthe employer and the union, therespondents explain that the union’swaiver authority does not extend to employees’ individual, noneco-nomic rights under the federal anti-discrimination statutes. They reasonthat a union is obligated to furtherthe collective interest of its bargain-ing unit, and this obligation neces-sarily takes precedence over, andoften conflicts with, the individualinterests and rights of its employ-ees. Because the federal anti-discrimination statutes protect, notmajoritarian processes, but an indi-vidual’s right to equal employmentopportunities, the respondents saythat the vindication of that right canonly be committed to arbitration bythe aggrieved individual and not bythe union in a collective bargainingagreement. Moreover, the respon-dents contend that labor arbitra-tion’s focus on the “law of the shop”is ill-suited to resolve statutory dis-crimination claims. (The law of theshop, sometimes referred to asindustrial common law, is found inthe practices of an industry or awork site.)

Noting that the ADEA expresslyrequires that any waiver of anemployee’s right to litigate be made

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by that affected individual, therespondents argue that the union isprecluded from waiving an employ-ee’s ADEA rights. Because the rightsafforded under the ADEA and otheranti-discrimination statutes areimportant public rights that devolveon employees as individuals and notas members of a collective bargain-ing unit, the respondents assert thatthe union cannot through a collec-tive bargaining agreement depriveemployees of their ability to vindi-cate those rights individually and incourt with the right to a jury trial. Itis the respondents’ position thatallowing union waiver would subju-gate employees’ anti-discriminationrights to the collective interest ofthe union. They state that thepotential for the employee to estab-lish a duty-of-fair-representationclaim is a poor substitute for therights and remedies available to that employee under federal anti-discrimination law.

Assuming it were somehow legallypossible for a union to waive anindividual’s right to pursue a judicialforum for his or her ADEA claims,the respondents contend that arbi-tration could not be compelled inthis case because the respondentscannot “effectively … vindicate”their rights in arbitration under thecollective bargaining agreement.While the petitioners seek to com-pel the respondents to arbitratewith them, the respondents say thatunder the collective bargainingagreement, they have no right toinvoke its arbitration provision overthe union’s objection. Thus, therespondents conclude there is noarbitral forum to which the petition-ers can compel them to arbitrate.

SIGNIFICANCEThis case focuses on the tensionbetween two lines of Supreme Courtcase law: Gardner-Denver (involv-ing arbitration of statutory discrimi-nation claims under the arbitration

clause in a collective bargainingagreement), and Gilmer v.Interstate/Johnson (involving arbi-tration of statutory discriminationclaims under the arbitration clausein an individual’s employmentagreement). Compare Wright v.Universal Maritime Service Corp.,525 U.S. 70 (1998) (holding that, inorder for a union to waive employ-ees’ rights to a judicial forum forstatutory discrimination claims, theagreement to arbitrate such claimsmust be clear and unmistakable);with EEOC v. Waffle House, Inc.,534 U.S. 279 (2002) (holding thatan agreement between employerand employee to arbitrate employ-ment-related disputes does not barthe EEOC from pursuing victim-spe-cific judicial relief in an Americanswith Disabilities Act enforcementaction).

In Gardner-Denver, the SupremeCourt addressed how statutes pro-hibiting employment discriminationrelated to the system of collectivebargaining and grievance arbitration.Under Gardner-Denver, if a unionchooses not to pursue a discrimina-tion claim to arbitration, the employ-ee-grievant is free to pursue theemployee’s statutory discriminationclaim in court. Gardner-Denver alsoheld that, if the union takes a statu-tory discrimination claim to arbitra-tion and does not prevail, the indi-vidual employee may avail himself orherself of legal relief de novo, thoughthe arbitration decision can be givenweight as evidence in the later civilproceeding.

In Gilmer v. Interstate/Johnson, theSupreme Court concluded thatCongress did not intend to precludearbitration of age discriminationclaims where an individual’semployment agreement provided forarbitration of discrimination claims.The Supreme Court did not, howev-er, determine whether an employerand a union could agree that labor

arbitration could be the sole andexclusive procedure for resolvingstatutory age discrimination claims.

Labor arbitration (sometimes calledgrievance arbitration) is an out-growth of collective bargaining.Labor arbitration grew to maturityin the post–World War II era. Duringthe war, employers and unions hadresolved many disputes througharbitration. Because of theirwartime successes, labor unions andemployers continued to employlabor arbitration after the war. Inlabor arbitration—arbitration that isthe product of a collective bargain-ing agreement—access to and con-duct of the arbitration is controlledby the union, and not by the indi-vidual employee. The enforceabilityof the agreement is governed by fed-eral common law under § 301 of theTaft-Hartley Act, not by the FederalArbitration Act or state law. SeeWright v. Universal MaritimeService. Labor arbitration claims(referred to as grievances) are heardby persons normally selected from apanel of labor arbitrators. Almost 40percent of labor arbitrators aretrained in industrial relations—notthe law. The procedures are basedon industrial relations principlesand do not include prehearing dis-covery of evidence. Moreover, theadvocate’s obligation is to the unionand not to the individual employee.

Unlike labor arbitration (or griev-ance arbitration), employment arbi-tration is conducted under an indi-vidual employment contract cov-ered, in most cases, by the FederalArbitration Act. The enforceabilityof an employment arbitration clause is determined by state law.Employment arbitration is generallysubject to legal procedures such asprehearing discovery, representationof the individual employee by legalcounsel, and the same burdens ofproof as would be applicable in ajudicial forum.

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156 Issue No. 3 Volume 36

In Textile Workers Union v. LincolnMills, 533 U.S. 448 (1957), theSupreme Court held a collectivebargaining agreement’s provision forgrievance arbitration was enforce-able—not by reference to theFederal Arbitration Act—but under§ 301 of the Taft-Hartley Act. TheCourt found that § 301 provided fora uniform federal common law ofthe collective bargaining agreementfashioned by the judiciary out ofnational labor policy and limitedonly by judicial “inventiveness.”Three years later, the SupremeCourt found labor arbitration to be an integral element of theautonomous system of self-govern-ment created by the collective bar-gaining relationship. UnitedSteelworkers of America v.American Mfg. Co., 363 U.S. 564(1960); United Steelworkers ofAmerican v. Warrior & GulfNavigation Co., 363 U.S. 574(1960); United Steelworkers ofAmerica v. Enterprise Wheel & CarCorp., 363 U.S. 593 (1960). TheSupreme Court explained that,unlike in commercial arbitrationwhere arbitration is a substitute forlitigation, labor arbitration is a sub-stitute for a strike.

The Supreme Court has recognizedthat individuals have limited rightsto enforce their individual rightsunder collective bargaining. Anemployee must first attempt toexhaust the grievance-arbitrationprocedure. Republic Steel Corp. v.Maddox, 379 U.S. 650 (1965). Afterexhausting the grievance-arbitrationprocedure, an employee can sue theemployer for an alleged breach ofcontract only if the employee couldprove that the union had breachedits duty of fair representation, eitherin declining to take the case to arbi-tration, or in its inadequate presen-tation of the claim in arbitration.See Vaca v. Sipes, 386 U.S. 171(1967); Hines v. Anchor MotorFreight, Inc., 424 U.S. 554 (1976).

A breach of a union’s duty of fairrepresentation occurs when aunion’s conduct toward a member ofthe collective bargaining unit it rep-resents is arbitrary, discriminatory,or in bad faith. A union may notarbitrarily ignore a meritoriousgrievance nor may it process thegrievance in a perfunctory manner.A union’s refusal to take an employ-ee’s grievance to arbitration iswrongful only if it can be fairlycharacterized as far outside a widerange of reasonableness, or elsewholly irrational or arbitrary. Wherea union breaches the duty of fairrepresentation in not arbitrating aclaim, the union bears a significantshare of any resulting liabilityshould it be found that the employ-er discriminated against theemployee. See Bowen v U.S. PostalService, 451 U.S. 212 (1983). Ifstatutory discrimination claims aredeemed covered by a grievance-arbitration procedure, an employerwould bear no liability for wrongfuldiscriminatory conduct if the unionhas not breached the duty of fairrepresentation in declining to takean employee’s discrimination claimto arbitration.

In Wright v. Universal Maritime,the Supreme Court held that thegeneral arbitration clause in a col-lective bargaining agreement did notrequire an employee to use the arbi-tration procedure for a claim thatthe employer had violated theAmericans with Disabilities Act. TheCourt said that, in order for a unionto waive employees’ rights to a judi-cial forum for statutory discrimina-tion claims, the agreement to arbi-trate such claims must be clear andunmistakable. Although findingthere was no clear and unmistak-able waiver in the collective bar-gaining agreement, the Court didnot reach the question of whethersuch a waiver would be enforceable.

In EEOC v. Waffle House, Inc., theSupreme Court held that an agree-

ment between an employer and anemployee to arbitrate employment-related disputes does not bar theEEOC from pursuing victim-specificjudicial relief in an Americans withDisabilities Act enforcement action.However, in the present case, theEEOC declined to pursue an actionfor judicial relief on behalf of therespondents.

If the Supreme Court rules in favorof the petitioners, an employee cov-ered by an arbitration clause in acollective bargaining agreementwhose claims were not submitted toarbitration would have to either per-suade the EEOC to litigate on theemployee’s behalf, or else bring a § 301 claim conditioning the vindi-cation of the employee’s statutoryrights on the employee’s success ina breach of the duty of fair repre-sentation claim. Likewise, employ-ers whose collective bargainingagreements contain arbitrationclauses that explicitly provide thatarbitration is the sole and exclusiveremedy for violation of anti-discrim-ination statutes will be able to com-pel arbitration instead of defendinglawsuits alleging discrimination.

ATTORNEYS FOR THE

PARTIESFor Petitioners 14 Penn Plaza LLCet al. (Paul Salvatore (212) 969-3000)

For Respondents Steven Pyett et al.(David C. Frederick (202) 736-8000)

AMICUS BRIEFSIn Support of Petitioners 14 PennPlaza LLC et al.

Chamber of Commerce of theUnited States (Samuel Estreicher(202) 326-3939)

Equal Employment AdvisoryCouncil (Rae T. Vann (202) 629-5600)

American Bar Association

In Support of Respondents StevenPyett, et al.

American Federation of Laborand Congress of IndustrialOrganizations and Change to Win(James B. Coppess (202) 637-5337)

Lawyers’ Committee for CivilRights Under Law, the AmericanAssociation of People withDisabilities, the Asian AmericanJustice Center, Legal Momentum,the Mexican American LegalDefense and Educational Fund, theNational Partnership for Women andFamilies, and the National Women’sLaw Center (Matthew D. Slater(202) 974-1500)

National Academy of Arbitrators(Matthew W. Finkin (217) 333-3884)

National Employment LawyersAssociation, AARP, and AmericanAssociation for Justice (KathleenPhair Barnard (206) 285-2828)

National Right to Work LegalDefense Foundation (Raymond J.LaJeunesse Jr. (703) 321-8510)

Service Employees InternationalUnion, Local 32BJ (Larry Engelstein(212) 388-2128)

United States of America(Gregory G. Garre, Solicitor General(202) 514-2217)

157