Employers Win Arbitration Case In Supreme Court, But Watch Out for Congress

In one of the few employment law cases on this year's docket, the Supreme Court today came close, but according to the majority, did not technically overrule one of its oldest precedents under Title VII, Alexander v. Gardner Denver (1974). (It is so old it pre-dates my passage of the bar by one year!)

In 14 Penn Plaza LLC v. Pyett (4/1/09) (pdf) Justice Thomas wrote for the majority in a 5-4 decision, holding a collective bargaining agreement that clearly and unmistakably requires union members to arbitrate claims arising under the Age Discrimination in Employment Act is enforceable. Justice Souter wrote a vigorous dissent, joined by Justices Stevens (who added his own dissenting opinion), Ginsberg and Breyer.

Much of the battle between Justice Thomas and Justice Souter is carried out in the footnotes, which is where in footnote 8, Justice Thomas delivered probably the best summary of today's opinion:

Because today’s decision does not contradict the holding of Gardner-Denver, we need not resolve the stare decisis concerns raised by the dissenting opinions. But given the development of this Court’s arbitration jurisprudence in the intervening years, see infra, at 16–19, Gardner-Denver would appear to be a strong candidate for overruling if the dissents’ broad view of its holding, were correct. See Patterson v. McLean Credit Union, 491 U. S. 164, 173 (1989) (explaining that it is appropriate to overrule adecision where there "has been [an] intervening development of the law" such that the earlier "decision [is] irreconcilable with competing legal doctrines and policies"). [internal cites to today's opinions omitted]

In order for this opinion to have an impact on any individual it would require that an employee be a member of a bargaining unit that has explicitly agreed that discrimination claims would be arbitrated rather than tried in court. Given the well documented decline in union membership, and the lack of such clauses in a large number of union contracts, the actual number of individuals is probably not all that great.

Of more immediate interest is how this case may be played out in the discussion of two pieces of potential legislation. First, EFCA opponents will use it to argue that it is another reason why it is important that employees retain the secret ballot, since they are electing a representative with the power to strip them of their right to have discrimination claims heard in court. Although I anticipate it will be used, I don't think it will have any great impact in that debate.

More significantly, I think this gives a shot in the arm to the Arbitration Fairness Act, which so far has not drawn a lot of attention. Here's the substance of that proposal:

No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of--

(1) an employment, consumer, or franchise dispute; or

(2) a dispute arising under any statute intended to protect civil rights.

(c) An issue as to whether this chapter applies to an arbitration agreement shall be determined by Federal law. Except as otherwise provided in this chapter, the validity or enforceability of an agreement to arbitrate shall be determined by the court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.

By precluding pre-dispute agreements, the Act would effectively kill arbitration of employment law disputes. Given today's result in 14 Penn Plaza, my guess is that the Arbitration Fairness Act will begin to get attention and pick up attraction, it will probably be revised to make it clear that it applies to a union waiver as well, so that today's opinion would effectively be overruled. That will have a tremendous impact on employers who have established mandatory arbitration programs.

Similar to the decision that led to the Lilly Ledbetter Act, today's ruling may turn out to be a very short term, if not Pyrrhic, victory for the business community.