The Supreme Court recently held under the Federal Arbitration Act that agreements to arbitrate statutory discrimination claims entered into by employers and employees are enforceable. In 14 Penn Plaza LLC v. Pyett, U.S. No. 07-581, the company’s union filed grievances on behalf of the respondents claiming age discrimination and other contract violations. However, the union withdrew the age discrimination claim because it believed it could not legitimately pursue the claim after having consented to the change in contractors. Thereafter, the respondents filed an ADEA complaint with the EEOC which later dismissed the complaint and issued a right to sue letter.

 

When the respondents later filed an ADEA suit in federal court, 14 Penn Plaza moved to compel arbitration. The motion was ultimately denied by the Second Circuit which held that a union could not waive a litigant's right to a judicial forum under the ADEA even though an individual employee may do so for his or her own claims. The Court rejected the majority view of the Circuit Courts of Appeal that employers and unions were not free to agree to a collective bargaining agreement that required the arbitration of the individual statutory discrimination claims of covered employees. However, the Supreme Court held that a union may waive the individual employee’s right to a judicial forum for the litigation of a federal age discrimination claim.

 

Arbitration clauses in contracts generally state that all disputes will be handled by arbitration rather than litigation. With growing court congestion, prolonged discovery, and motion practice driving up the cost of litigation, arbitration has become an increasingly popular form of alternative dispute resolution. Arbitration allows an independent arbiter to settle a dispute rather than putting it before court in a lawsuit. Arbitration can have the following advantages: (1) it can be faster than litigation; (2) it can be cheaper than litigation; (3) it is less formal; and (4) arbitrators tend to be more sophisticated and knowledgeable than juries.

 

In essence, the Court decision in 14 Penn Plaza LLC vindicates the right of employers, unions, and employees to have almost all the claims of their choosing – including statutory discrimination claims – heard in the more expeditious and lower-cost forum of arbitration. Moreover, in addition to the above-mentioned benefits, this decision may mean that employers no longer have to face the same claim twice – once in arbitration and again in court.

 

Absent an agreement to do so, parties are not required to submit disputes to arbitration. Therefore, if employers intend to arbitrate employment issues and claims, they must explicitly state their intent to do so in the employment contract. Jackson & Campbell’s Employment Law Practice Group can provide guidance and assistance to all employers with drafting proper arbitration clauses in employment contracts to avoid costly litigation as well as provide counsel on other related employment matters.