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In our last Insight, we noted that the U.S. Supreme Court had just granted certiorari to address a lingering question at the intersection of labor law and arbitration law: Can a collective bargaining agreement “waive” a covered employee’s right to assert federal claims of employment discrimination in a judicial forum?

Many believed that the Court had firmly answered that question “no” in its 1974 decision in Alexander v. Gardner-Denver. But eleven years ago the Court hinted in Wright v. Universal Maritime Service that a different answer might be possible. Finally, this past Term, the Court ended years of speculation by holding, by a vote of 5 to 4, that employees covered by a CBA that forbids discrimination on the basis of race, sex, age, and the like can be required to resolve their claims of employment discrimination exclusively through the grievance and arbitration procedures of a CBA if it “clearly and unmistakably” states that they must do so. The case is 4 Penn Plaza LLC v. Pyett.

The Penn Plaza case arose when long-service night watchmen in a New York City office building were reassigned to less desirable positions as night porters and light duty cleaners after the building’s management engaged an outside security contractor. The watchmen sued, claiming age discrimination, after their union declined to pursue their discrimination grievances to arbitration. Because the union had consented to the arrangement that brought in the employees who displaced the plaintiffs, the union believed it could not legitimately argue to an arbitrator that the reassignments were discriminatory. The CBA contained a clause mandating arbitration for employees’ claims under all anti-discrimination statutes, declaring such claims “subject to the grievance and arbitration procedures as the sole and exclusive remedy for violations.” The trial court and the appeals court held that under Gardner- Denver this clause did not warant dismissal or a stay of the displaced employees’ lawsuit.

These facts illustrate one principal argument for treating collectively bargained arbitration provisions differently from individual employment contracts. Unions typically retain complete control over whether, and how vigorously, to pursue their members’ complaints at both the grievance and arbitration stages. At the same time, unions must balance the competing interests of employee subgroups within a bargaining unit in making such decisions. Those interests often do not coincide. The EEOC and others who filed amicus briefs, not to mention the four dissenting Supreme Court Justices, cited this backdrop and Gardner-Denver in support of their view that the displaced employees could proceed with their age discrimination lawsuit notwithstanding the exclusive remedy language of the CBA.

But the five Justices in the majority saw the issue differently. Justice Thomas’s majority opinion characterized Gardner-Denver as resting on “a misconceived view of arbitration” that the Court had abandoned in subsequent cases: That an agreement to submit statutory discrimination claims to arbitration amounted to a waiver of those rights rather than a mere change of forum. Furthermore, the competence of arbitrators to decide federal statutory claims of all kinds has become well established in the last quarter-century. To the majority, neither Gardner-Denver nor the point that unions often encounter conflicts of interest could override the facts that (1) the plaintiffs’ authorized representative (the union) had collectively bargained for final and binding arbitration of their workplace discrimination claims, and (2) the text of the age discrimination statute did not preclude binding arbitration of age discrimination claims. The majority saw the threat of suits against a union for breach of its duty of fair representation as a meaningful curb on discriminatory conduct by unions in negotiating and acting under CBAs. It noted that union members are also free to file discrimination claims with the EEOC or the NLRB, and those agencies can seek judicial intervention on an individual’s behalf.

In a concluding passage, the majority somewhat ambiguously reserved the question of whether its analysis would hold if a union completely blocked arbitration of a member’s discrimination claims, thereby turning the CBA into a substantive waiver of the statutory right. Although the plaintiffs apparently disagreed, Penn Plaza insisted this was not the situation in the case at hand, and that the plaintiffs were able to pursue arbitration even if the union declined to participate.

On a related arbitration issue, the U.S. Court of Appeals for the Sixth Circuit recently decided a case that demonstrates the strength of the modern judicial commitment to enforcing standardized agreements to arbitrate employment disputes so long as there is no overreaching. In Mazera v. Varsity Ford Management Services, Omari Mazera earned $10 per hour as a car porter at an auto dealership. The employee handbook contained an arbitration clause that was added after Mazera became employed. Following his discharge, Mazera sued for race and disability discrimination, and asked the court to declare the arbitration provision unenforceable.

Mazera raised a number of arguments, some more familiar than others: (1) he lacked bargaining power; (2) he was not represented in making the agreement to arbitrate; (3) his asserted non-proficiency in English; (4) his lack of understanding of the substance of the agreement; and (5) the absence of consideration for adding the new term of employment. The Sixth Circuit brushed aside all of these arguments based on prior decisions affirming the enforceability of arbitration agreements, noting that adequate consideration existed if the arbitration process was binding on both employer and employee and that a party who signs a contract has a duty to know what he is signing.

Also at issue in Mazera was a cost-splitting provision of the Varsity Ford handbook’s arbitration policy that required an employee seeking arbitration to deposit with the employer, within ten days from the date of the challenged decision, the lesser of $500 or five days’ pay. The trial court had declared this provision an unduly heavy burden on an employee’s ability to vindicate his rights, applying the Sixth Circuit’s 2003 decision in Morrison v. Circuit City Stores, Inc. In light of Mazera’s modest income, the Sixth Circuit found that the combination of sizeable cost and a short timeline made the deposit requirement too much to demand. However, the arbitration policy also permitted an employee to request a waiver of the deposit. Since Mazera had not asked for a waiver before going to court, the panel directed that Mazera could request a waiver on remand — with an unmistakable signal that the arbitration agreement’s enforceability hinged on granting the waiver.

Noel D. Massie